Valuation

How do you set a valuation on a food business?

Gisela Macedo

August 4th, 2015

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?

John Seiffer Business Advisor to growing companies

August 4th, 2015

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. 

Jonathan Heyne Co-founder & CEO at Mentive

August 4th, 2015

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.

Michael Brill Technology startup exec focused on AI-driven products

August 4th, 2015

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.

Zvi CFA Senior Quantitative Analyst | Data Scientist

August 5th, 2015

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

Rahul Uppal Experienced business and technology advisory professional

August 4th, 2015

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

Celeste De Armas

August 6th, 2015

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 Founder @ Equidam

January 18th, 2016

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