News & Resources

Valuating a business for startup funds

Jan 31, 2011 Karen Umpierre

It may seem like a double-edged sword when it comes to seeking capital for a startup business. Without a business valuation, it is difficult to procure capital, but without capital, it is harder to value a business. The situation is not impossible, however, says Business Daily. "Entrepreneurs need to put a value on their startups in order to raise money, and investors need to put a value on their investments to generate liquidity," explains the site. Although a business owner may think his or her business is worth a certain amount, that number is worthless compared to what the market deems a business is valued. In order to gauge how a startup will stack up in the market, it is important to compare it to similar companies in its industry. "If you have a high-tech or high-growth startup, accountants and lawyers are among the best advisors to help you determine the market rate for comparable companies at your stage," advises the site. While calculating a business valuation can be a long process, entrepreneurs must keep in mind that there is no global calculating device that exactly measures these figures. The process is more of an art than an exact science.