1. What you will learn
This lesson turns the wish to know what your business is worth into three measurable outcomes for the next ninety days, and runs a diagnostic of how ready your records and ownership are for a valuation argument. You will finish with a one-page outcome map naming a baseline, target, owner and review date.
2. The idea explained
Founders often say they want to know their valuation as if it were a single answer waiting to be found. The wish hides the real questions. Are the records good enough to support any argument? Is the ownership clean? Which assumptions carry the most weight? A valuation is an argument, not a fact, and an argument needs evidence. So the outcomes of this programme concern preparing the evidence and the case, not extracting a number.
The diagnostic comes first. Five areas decide readiness. Records: how many of the last twelve months are reconciled to the books and bank. Documents: how many of the items a counterparty would ask for exist and are current. Ownership: whether the cap table matches the signed documents and whether any promises or open matters exist. Concentration: how much revenue depends on the largest customer or on one person. And method coverage: how many valuation methods you have applied and how far apart the answers are. Measure each with a count or a share.
Good outcomes are specific and within your control. Reconcile all twelve months of records is one. Raise the share of documents in order from a stated share to a higher one is another. Produce a written range from three methods, with an assumption register and a sensitivity table, is a third. Outcomes such as get a valuation of a certain size or raise money depend on other people and on luck, so they do not belong in the map.
Write each outcome so that a stranger could tell, on the review date, whether it was met. Give it an owner, a review date and the action for the coming month.
Success is not guaranteed. Most new ventures do not succeed, and a well-prepared file does not ensure an investor or a buyer. The figures in these lessons are invented, and nothing here is investment, tax or legal advice.
Involve your accountant and advocate from the start, since the outcomes depend on records and ownership that they know best.
Apply it
3. How to apply it in your own business
Gather the diagnostic numbers. For records, count how many of the last twelve months you can reconcile between your accounting records and your bank statements. For documents, list the items a counterparty would ask for and count how many exist and are current. For ownership, produce the cap table and mark any difference from your signed documents and any promises made. For concentration, compute the share of revenue from your largest customer. For methods, write which you have applied.
Choose three outcomes: one on records, one on documents or ownership, and one on the valuation file itself. For each, write the baseline, the target, the owner and the review date. Then write the single action for the coming month that most directly moves each, such as reconciling the four unreconciled months.
Translate each outcome into a countable result. Keep the map to one page and put it where you see it. Share the relevant lines with your accountant and advocate and agree who does what. Review at the end of each month, and rewrite a target if the facts show it was unrealistic.
Add a risk line: what could spoil the quarter, such as a busy season, a key person leaving or an unexpected legal matter, and what you would do. Do not approach investors until the outcomes are met, unless there is a reason to move sooner and you have taken advice.
Store the map in your valuation file and compare it at the end of ninety days with the state of the file.
Worked example
4. Worked example
Consider Ipsita, who runs a direct-to-consumer tea brand in Guwahati with six staff. All figures are invented. Her diagnostic. Records: 8 of the last 12 months are reconciled, which is 8 divided by 12, about 66.7 per cent. Documents: of 24 items on the counterparty list, 14 are in order, which is 14 divided by 24, about 58.3 per cent. Ownership: the cap table shows herself at 70 per cent and a co-founder at 30 per cent, but a promise of 2 per cent to an early adviser is unrecorded. Concentration: her largest customer, a hotel chain, provides 32 per cent of revenue. Methods: none applied yet.
Her three outcomes. First, reconcile all 12 months of records, moving from 8 to 12. Second, raise documents in order from 14 to 21 of 24, which is 87.5 per cent, and settle the adviser's share with her advocate. Third, produce a valuation file with three methods, an assumption register, a sensitivity table and a written range.
In counts: four more months to reconcile, seven more documents to complete, and one file to produce. She assigns the records outcome to her accountant with herself, the documents and ownership to herself with her advocate, and the file to herself. She sets reviews for the last Saturday of each month.
Her risk line: a festival season will raise orders and strain her time. Her action for the first month: reconcile the four oldest months and list the seven documents. She notes that reaching the outcomes will prepare her for a conversation but will not make an investor say yes. She does not plan to approach anyone until the file is reviewed. She treats all of the figures as invented illustrations for the method.
5. Common mistakes and how to fix them
The first mistake is setting an outcome about the number itself. A price depends on others, so set outcomes about records, documents and the file.
The second mistake is skipping the diagnostic. You may polish a model while the ownership record is wrong, so count records, documents and holdings first.
The third mistake is leaving informal promises unrecorded. They surface in due diligence, so raise them with your advocate now.
The fourth mistake is approaching investors too early. You may not know your own numbers, so wait until the outcomes are met unless advised otherwise.
Key takeaways
6. Board summary
Replace the wish to know your value with three measurable outcomes. Diagnose records, documents, ownership, concentration and method coverage. Set outcomes about preparation, not about a price. Assign owners and review dates; involve your accountant and advocate. A valuation is an argument, and the figures here are invented.
Check your understanding
7. Practice and self-check
Question 1. What share of 12 months is 8 reconciled? Answer: About 66.7 per cent. Question 2. What share of 24 documents is 14 in order? Answer: About 58.3 per cent. Question 3. What share is 21 of 24? Answer: 87.5 per cent. Question 4. How many more months to reconcile? Answer: 4. Question 5. How many more documents? Answer: 7. Question 6. What ownership issue did she find? Answer: An unrecorded promise of 2 per cent to an early adviser. Question 7. What is her largest customer's share? Answer: 32 per cent. Question 8. Why is a price outcome unsuitable? Answer: It depends on others and on luck. Question 9. Who owns the records outcome? Answer: Her accountant, with herself. Question 10. Will reaching the outcomes ensure an investor? Answer: No, it only prepares her.