Although there are many variables in play when an investor evaluates your business, its intrinsic value may provide the most realistic view. Angel investors and institutional investors may look for different attributes when measuring your company’s value for investment or business financing.
A given investor’s view may also be different when evaluating your start-up business versus evaluating a more-established business with a longer track record. Thus, valuation is typically a mix of art and science. No matter which stage of investment you are in, and which type of investment you hope to attract, however, intrinsic value is a wise place to focus. Calculations for measuring intrinsic value vary but typically involve estimating the company’s future value on a certain date, based on projected cash flow.
What Is Intrinsic Value in the Business World?
Intrinsic value is independent of the over-reactive stock market and its daily fluctuations, which may (or may not) reflect your company’s reality at any particular moment. (However, intrinsically valuable companies, if run that way long term, should achieve an upward trajectory on the stock market.)
Build intrinsic value by maintaining a strategic plan that prioritizes growth and lasting value for your company, even if the market value fluctuates. When aiming for strong intrinsic value, don’t make decisions based only on short-term gains. For example, closing a plant that is losing money today could be the wrong decision, if you have a promising use for it in your near-future business plan. Provided that you have a well-articulated long-term growth plan, you can manage investor expectations by having/expressing solid reasoning behind your strategy and business decisions. This helps investors understand short-term fluctuations along the way.
When you prioritize true value, rather than simply seeking the highest near–term stock price for your company, you are creating intrinsic value. Make business decisions with value in mind and you’ll help place your company on solid footing with investors. You will also demonstrate solid value to lenders as well when you’re seeking business financing.
Learn more about business financing options to support your company’s growth. Contact Rotay Capital Finance today.