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Pulakit Bararia

Building Snippetz la... • 5m

So how do you calculate your company’s valuation? Here’s the simplest way to think about it: 1. Forecast Future Earnings: Start with what your business makes now and apply a growth rate. Example: Year 1: $100K → Year 2: $120K → Year 3: $144K. 2. Adjust for Time (Discounting): Money now is worth more than money later. Use a discount rate (e.g., 10%) to calculate what those future earnings are worth today. 3. Add Long-Term Value (Terminal Value): Estimate how much your business will be worth after 3–5 years. Example: Coffee shop: Discounted future profits = $330K. Terminal value = $500K. Total Valuation = $330K + $500K = $830K. Simple: future cash + long-term or you can go like this 1. Find a Key Metric: Use your company’s profit, revenue, or EBITDA (earnings before interest, taxes, etc.). Example: Your profit is $100K. 2. Apply an Industry Multiple: Look at what similar companies are selling for (e.g., 5x profit). Example: $100K × 5 = $500K valuation.

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Replies (7)

Anonymous 1

Hey I am on Medial • 5m

For startups with no profits yet, these methods are irrelevant. Most valuations are based on founder reputation, team strength, and market potential. Look at OpenAI or SpaceX—early investors didn’t invest because of discounted cash flow; they believed in the vision

1 Reply

Vaibhav Nanda

Hey I am on Medial • 5m

early stage valuation is more art than mathematics, believe in your vision, don't value yiur company on cash flow positive+1 year

1 Reply

SamCtrlPlusAltMan
•

OpenAI • 5m

Using a 10% discount rate might be oversimplifying things. For early-stage startups, the risks are much higher, and discount rates of 20–30% are more realistic. Applying the wrong rate can lead to overvalued projections that investors will see right through

1 Reply

Pulakit Bararia

Building Snippetz la... • 5m

your company doesn’t have profit : 1. Focus on Revenue: Use your company’s current or projected revenue instead of profit. Example: You’re making $200K in annual revenue. 2. Apply an Industry Multiple: Check what similar businesses in your industry are valued at (e.g., 3x revenue). Example: $200K × 3 = $600K valuation.

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