Valuation

The process of determining the current worth of a business, asset, or investment, typically expressed as a monetary amount. Valuation methods vary by business type and purpose: revenue multiples (common for SaaS and e-commerce), discounted cash flow (projecting future earnings), comparable sales (similar business sale prices), or asset-based approaches. Private business valuations are more art than science, influenced by profitability, growth rate, market conditions, defensibility, transferability, and industry trends. Understanding valuation helps business builders make strategic decisions increasing enterprise value, enables realistic sale expectations, and guides investment decisions. Recurring revenue businesses typically command premium valuations compared to project-based models.

Why it matters

Understanding valuation drivers enables building more valuable businesses. Strategic decisions (recurring revenue models, systematisation, growth) dramatically impact eventual exit values, potentially difference of millions when selling.