How To Use Intrinsic Value of Your Business as a Persuasion for Investors
Your company is growing and getting stronger month after month. You are looking to continue this positive flow, but you still need capital infusion at times to do it. When developing a business strategy to attract future investors to sink their money into your company, you may be tempted to go the usual route of valuing your company based on market value.
However, going the way of highlighting the intrinsic value may, instead, yield a better prediction of future financial growth and get investors lining up to be a part of it.
What Is Market Value?
Your business may have sold shares to investors as a way to gain capital to grow the business further. In doing so, you created a fair market value of the company. Market value is the amount you could sell the business for. Potential buyers look at the number of shareholders and the total of the shares. To arrive at a sale price, buyers multiply the total shares by the current rate of a single one.
Coming up with the value of your company in this way comes down to year-over-year projections, which can be wildly inaccurate. Seasons change, and so do business trends. Whereas you may have excelled this time last year, that isn’t happening this year. That doesn’t mean, however, that your business is not worth investing in. It just means basing everything on what you did last year at this time is misleading. It does not account for normal market swings.
What Is Intrinsic Value?
The intrinsic value of your business is a much more complicated process, but it gives a more accurate depiction of where the company stands and where it’s going. Taking tangible elements, such as cash, along with the intangible, like predictions of customer trends, can tell a very different tale than market value. Utilizing this business strategy when trying to attract investors allows them to see a more well-rounded forecast for the future.
When getting more money for your business means selling investors on its worth, it is essential you price it right. Selling yourself short by just using a market value which does not paint an accurate picture of the nuts and bolts of the business may result in less-than-enthusiastic investors or none at all. However, using intrinsic value to highlight your wins and forecast a more accurate growth model may be the best business strategy to get more investors to ante up..