hi I’m Evan Carmichael and in this video I wanted to answer your questions for
I wanted to answer your questions for
I wanted to answer your questions for one of my readers
one of my readers
one of my readers freestyles who owns a website called
freestyles who owns a website called
freestyles who owns a website called local arena and is having a hard time
local arena and is having a hard time
local arena and is having a hard time figuring out how much his business is
figuring out how much his business is
figuring out how much his business is worth because he wants to raise equity
worth because he wants to raise equity
worth because he wants to raise equity capital from getting an investor on
capital from getting an investor on
capital from getting an investor on board so a little bit of background on
board so a little bit of background on
board so a little bit of background on the business they have put around
the business they have put around
the business they have put around $15,000 worth of services into the
$15,000 worth of services into the
$15,000 worth of services into the business and in the generating revenue
business and in the generating revenue
business and in the generating revenue of about $1,200 per month so he’s
of about $1,200 per month so he’s
of about $1,200 per month so he’s figuring out how much is my business
figuring out how much is my business
figuring out how much is my business work and so he’s got a different
work and so he’s got a different
work and so he’s got a different valuation from investors in one of my
valuation from investors in one of my
valuation from investors in one of my opinion so I’ve been in the VC world
opinion so I’ve been in the VC world
opinion so I’ve been in the VC world before and we were raised in half a
before and we were raised in half a
before and we were raised in half a million 15 million dollars for companies
million 15 million dollars for companies
million 15 million dollars for companies and valuation is something that we
and valuation is something that we
and valuation is something that we always looked at and the cost based
always looked at and the cost based
always looked at and the cost based valuation rarely works so to say well I
valuation rarely works so to say well I
valuation rarely works so to say well I put fifteen thousand dollars into my
put fifteen thousand dollars into my
put fifteen thousand dollars into my business so it’s worth X amount it’s
business so it’s worth X amount it’s
business so it’s worth X amount it’s really hard to justify
really hard to justify
really hard to justify unless it’s an asset that they can go
unless it’s an asset that they can go
unless it’s an asset that they can go and sell so if you bought a piece of
and sell so if you bought a piece of
and sell so if you bought a piece of land you bought some equipment that they
land you bought some equipment that they
land you bought some equipment that they can sell easily has that tangible asset
can sell easily has that tangible asset
can sell easily has that tangible asset value then that’s we can look at cost
value then that’s we can look at cost
value then that’s we can look at cost base usually you gotta look at how much
base usually you gotta look at how much
base usually you gotta look at how much the company is going to be worth and you
the company is going to be worth and you
the company is going to be worth and you want to look at the revenue generated
want to look at the revenue generated
want to look at the revenue generated now if you see the business that is not
now if you see the business that is not
now if you see the business that is not the stock doesn’t have a lot of growth
the stock doesn’t have a lot of growth
the stock doesn’t have a lot of growth opportunity web-based businesses will
opportunity web-based businesses will
opportunity web-based businesses will typically sell for one two three times
typically sell for one two three times
typically sell for one two three times annual revenue so if you see it growing
annual revenue so if you see it growing
annual revenue so if you see it growing slowly then you might be looking in that
slowly then you might be looking in that
slowly then you might be looking in that range so figure out how much you’re
range so figure out how much you’re
range so figure out how much you’re gonna make for the year times up by one
gonna make for the year times up by one
gonna make for the year times up by one two three and that’s roughly what your
two three and that’s roughly what your
two three and that’s roughly what your company is going to be worth but if you
company is going to be worth but if you
company is going to be worth but if you see it as a high-growth opportunity so
see it as a high-growth opportunity so
see it as a high-growth opportunity so that pulp money of you’re making a month
that pulp money of you’re making a month
that pulp money of you’re making a month you see it you know
you see it you know
you see it you know 100 times that then you want to
100 times that then you want to
100 times that then you want to basically look at those growth
basically look at those growth
basically look at those growth projections and that’s typically what a
projections and that’s typically what a
projections and that’s typically what a PC a venture capitalist or an angel will
PC a venture capitalist or an angel will
PC a venture capitalist or an angel will look at the look at for the next 5 years
look at the look at for the next 5 years
look at the look at for the next 5 years the one see what your projections are so
the one see what your projections are so
the one see what your projections are so you know this year how much gonna make
you know this year how much gonna make
you know this year how much gonna make next year the next year the next year
next year the next year the next year
next year the next year the next year the next year so 5 years out how much
the next year so 5 years out how much
the next year so 5 years out how much you gonna be making and what we do is
you gonna be making and what we do is
you gonna be making and what we do is usually discount that value back so look
usually discount that value back so look
usually discount that value back so look at how much going to be earning you know
at how much going to be earning you know
at how much going to be earning you know for those five years discount that back
for those five years discount that back
for those five years discount that back to today and you get a rough valuation
to today and you get a rough valuation
to today and you get a rough valuation of how much you’d be making you have to
of how much you’d be making you have to
of how much you’d be making you have to justify that somehow and a lot of times
justify that somehow and a lot of times
justify that somehow and a lot of times it’s just is projection right so it’s a
it’s just is projection right so it’s a
it’s just is projection right so it’s a guess but you want to have confidence in
guess but you want to have confidence in
guess but you want to have confidence in those numbers and the more confident you
those numbers and the more confident you
those numbers and the more confident you are and the better you can explain your
are and the better you can explain your
are and the better you can explain your rationale for getting to those numbers
rationale for getting to those numbers
rationale for getting to those numbers the more faith you have from an investor
the more faith you have from an investor
the more faith you have from an investor and the more likely you’ll get a better
and the more likely you’ll get a better
and the more likely you’ll get a better evaluation at the end of the day it’s
evaluation at the end of the day it’s
evaluation at the end of the day it’s still up to you and the investor to come
still up to you and the investor to come
still up to you and the investor to come up with that valuation the further along
up with that valuation the further along
up with that valuation the further along you are in your goals the
you are in your goals the
you are in your goals the betterevaluation you get the closer you
betterevaluation you get the closer you
betterevaluation you get the closer you are to startup usually the worst
are to startup usually the worst
are to startup usually the worst valuation you get so it’s great that you
valuation you get so it’s great that you
valuation you get so it’s great that you already have some customers you have
already have some customers you have
already have some customers you have some revenue coming in a couple things
some revenue coming in a couple things
some revenue coming in a couple things to think about if you want to get a
to think about if you want to get a
to think about if you want to get a better valuation if you know you need to
better valuation if you know you need to
better valuation if you know you need to raise $50,000 what you might say is I
raise $50,000 what you might say is I
raise $50,000 what you might say is I need $10,000 at this valuation and if I
need $10,000 at this valuation and if I
need $10,000 at this valuation and if I hit these certain milestones so maybe
hit these certain milestones so maybe
hit these certain milestones so maybe maybe a target to get $5,000 a month you
maybe a target to get $5,000 a month you
maybe a target to get $5,000 a month you say if I get to $5,000 a month then I
say if I get to $5,000 a month then I
say if I get to $5,000 a month then I need another $25,000 but at a better
need another $25,000 but at a better
need another $25,000 but at a better valuation then if we hit $15,000 a month
valuation then if we hit $15,000 a month
valuation then if we hit $15,000 a month that I need another $25,000 a better
that I need another $25,000 a better
that I need another $25,000 a better valuation or whatever is so you need
valuation or whatever is so you need
valuation or whatever is so you need $50,000 maybe you don’t need it all up
$50,000 maybe you don’t need it all up
$50,000 maybe you don’t need it all up front and you can phase it out over a
front and you can phase it out over a
front and you can phase it out over a period of time you eat milestones you
period of time you eat milestones you
period of time you eat milestones you agree with the investor every time you
agree with the investor every time you
agree with the investor every time you raise the capital it’s at a cheaper rate
raise the capital it’s at a cheaper rate
raise the capital it’s at a cheaper rate so you’re not giving up as much equity
so you’re not giving up as much equity
so you’re not giving up as much equity and you’re still getting
and you’re still getting
and you’re still getting money unique but it requires you to
money unique but it requires you to
money unique but it requires you to actually go and hit the targets that you
actually go and hit the targets that you
actually go and hit the targets that you set out so you better make sure you can
set out so you better make sure you can
set out so you better make sure you can actually hit those targets the last
actually hit those targets the last
actually hit those targets the last thing I would encourage you to think
thing I would encourage you to think
thing I would encourage you to think about when bringing on investor is don’t
about when bringing on investor is don’t
about when bringing on investor is don’t just go for somebody with money
just go for somebody with money
just go for somebody with money especially in this early stage if you’re
especially in this early stage if you’re
especially in this early stage if you’re looking for an angel investor you want
looking for an angel investor you want
looking for an angel investor you want somebody who can help you so somebody
somebody who can help you so somebody
somebody who can help you so somebody who has contacts who can introduce you
who has contacts who can introduce you
who has contacts who can introduce you to people who can get you out there and
to people who can get you out there and
to people who can get you out there and help promote your product beyond just
help promote your product beyond just
help promote your product beyond just somebody who gives you money and either
somebody who gives you money and either
somebody who gives you money and either you know completely stays away from the
you know completely stays away from the
you know completely stays away from the business or worse tries to interfere and
business or worse tries to interfere and
business or worse tries to interfere and doesn’t really know much about your
doesn’t really know much about your
doesn’t really know much about your business and starts to drag it down a
business and starts to drag it down a
business and starts to drag it down a little bit so think about who the person
little bit so think about who the person
little bit so think about who the person coming in is it’s a lot like getting
coming in is it’s a lot like getting
coming in is it’s a lot like getting married you got to really like the
married you got to really like the
married you got to really like the person they have to have a lot of
person they have to have a lot of
person they have to have a lot of potential to help you so really focus on
potential to help you so really focus on
potential to help you so really focus on who that person is before making the
who that person is before making the
who that person is before making the decision I hope that helped if you liked
decision I hope that helped if you liked
decision I hope that helped if you liked the video please give it a thumbs up and
the video please give it a thumbs up and
the video please give it a thumbs up and it also love to hear your thoughts and
it also love to hear your thoughts and
it also love to hear your thoughts and feedback if you want to leave a comment
feedback if you want to leave a comment
feedback if you want to leave a comment below the video and stay tuned for the
below the video and stay tuned for the
below the video and stay tuned for the next episode
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