Company valuation is not only about financials: the story you present to investors significantly influences the results of the negotiation process. Gianluca Valentini, co-founder of Equidam, explains what valuation really is about and how you lead investors to agree on a good one.
Let’s break down valuation to what it actually is.
Valuation is nothing else than an agreement between two parties, on the price for the transfer of a business. It’s as simple as that: it’s the price. Thus, whenever a price is involved, there is a good part of negotiation between party A and party B, because the first will try to sell the business as high as possible while the latter will try to buy the business at a price as low as possible. If each of them has a different opinion, how do you combine them? That’s where valuation comes into the practice. Valuation is where you use an objective and disciplined approach to estimate the value of the business, in a way that the other party is convinced about your opinion or vice versa.