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How do you set a valuation on a food business?

I just got investors, but a problem: how to valuate a company that is about to start, has 6 clients, no parallel in the market - so, no multiplier - and a new product?

7 Replies

Michael Brill
1
0
Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
Maybe broaden your definition of comparables... there are always parallels. And with current valuations it's likely to work in your favor. Don't even both heading down a DCF road.
Jonathan G. Heyne
2
0
Jonathan G. Heyne Entrepreneur
Co-founder & CEO at Mentive
Or you could just not set a valuation. Putting a price tag on such early stage companies is really hard and rarely accurate.
Raise the round on a convertible note, and set the valuation when you raise the next round after learning much more about your business, the market, your customers... It'll be easier to estimate what the business is worth then.
Rahul Uppal
0
0
Rahul Uppal Entrepreneur
Experienced business and technology advisory professional
Hi Gisela, How about valuation using a cash flow approach? Also look up venture capital method of valuation. I am sure you know that "Valuation is as much an art as it is science". Given that, you need to evaluate the deal environment (including interests of all parties) and use reasonable assumptions for your valuation. I would highly recommend presenting a few different scenarios Best, Rahul Uppal Best, Rahul Note: This email may contain privileged and confidential information
John Seiffer
3
0
John Seiffer Advisor
Business Advisor to growing companies
If you don't think there's a parallel in the market, then you aren't looking in the right way. And that's a bigger problem than just not coming up with a valuation.

I can imagine that the (particularly in the food business) there may not be another PRODUCT quite like yours but there's probably a parallel business model. Think about why people eat it, and under what circumstances. For example, is it a snack food? Then consider the business model of other snacks. Is it a meal eaten away from home? Consider other meals of similar price, speed and level of luxury. Is it a food gift item? An ingredient? a drink? Again consider how others like it are sold.

That will give you your business model, who your customers are what your price points and cost structure should be.
Zvi Goldstein, CFA
0
0
Senior Quantitative Analyst | Data Scientist
Find some companies that share different elements with yours. So, some other food businesses, and other kinds of business that have certain similarities with your own. Use those to develop the benchmarks for the different financial ratios and metrics you project. So, for example, let's say you'll have a big capex investment upfront, like a major food supplier. So, find some and extract your capex ratios from those. And, if you expect to grow fast like a franchise, then extract your growth rates from similar franchises. If you can't find companies that share elements with your own company, you either have a sure-to-fail business, or you think it's more unique than it is. Use Google finance to get the accounting data. Google is great because
Celeste De Armas
0
0
Celeste De Armas Entrepreneur • Advisor
Senior Executive/Consumer/Internet/Hispanic Market//Marketing
Gisela,
not sure that I understand that you got investors but did not set a valuation? in any case as has been stated earlier - there are always parallels if not exact products -so you would look for comparables in your segment - eg., baked goods, confection, snacks, etc. I have a list of private food company acquisiton data that may be of help but it is dated. I gathered our data from articles in the press. Having raised money for a start up food company that we ran for 8 years I would say at this early stage of your company the important thing is to focus on growth and don't worry about valuation - that will take care of itself in due time.
Daniel Faloppa
0
0
Daniel Faloppa Entrepreneur
Founder @ Equidam
Hi Gisela,

for this we created equidam.com, we include 5 of the most commons methods and try to make it as easy as possible for everybody to use!

Let me know what you think if you try it out.

Regards
Daniel
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