Fundraising · Valuation

Tips on getting strong valuation for services group?

Alex Inman Servant to Learning

July 27th, 2014

I have an EdTech consulting and professional development group that is ready for the next level.  We've got a few years of experience and the last 3 quarters have had extremely strong sales.  In the Education Consulting space, there is a long time between sales and receipt of cash.  However, I want to leverage the current excitement to expand my market reach and sales capacity but want to do this faster than waiting for the organic growth.  Common Core and their associated tests make this a good time to grow fast.  I just need more capital to do this.

I assume I should get a valuation before seeking funding.  Any tips or resources on where to go and how to position ourselves?
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Shobhit Verma

July 27th, 2014

Hi Alex. Is there a website that you can share? Consulting valuations are usually based on how big a brand you can build. Depending on the service there may not be repeat customers and understanding these details is crucial to valuation. 

Alex Inman Servant to Learning

July 27th, 2014

Hi Shobhit, Our website is www.educollaborators.com. Currently, we do have some repeat business but not the kind you get with a subscription. We do have a strategy to deal with that but it would require a little money to properly market it. We aren't your average mom and pop consulting group. We have formal relationships with CDWG, HP, Lenovo and Intel. We've developed some IP in our methodologies. Do you (or anyone) know groups that do valuations for services groups like us?

Shobhit Verma

July 27th, 2014

Hi Alex, For a non public company. The only valuation that matters is the one done by someone who writes a check with that valuation. In other words, the only benefit you get by getting a valuation done by a non-investor is that they will hopefully ask you enough meaningful questions and calculate a bunch of metrics and do market analysis which are relevant to your business. Most projections will be ignored by a seasoned investor unless backed by good assumptions. The investor will (should) always do their own valuation anyways. In your case it would make sense not to waste a lot of money on third party valuations. Find some smart MBA / consultants to do it for you but try to defer valuation questions and raise money in convertible notes instead. From an investor's point of view, lending is better than investing when dealing with a services company. I think the founder should do this exercise himself/herself with some coaching from someone really good. Try finding a former Mckinsey/Bain/ BCG person from hourlynerd.com If you are low on budget, contact me and I will see if I can help. Good luck! Shobhit