With the VC method, if your customers buy your product every month:
Steps
- Estimate your investment
- Estimate the investor’s equity stake
- Calculate your valuation. Valuation = investment / equity stake
- Estimate the investor’s required money multiple
- Calculate your exit value. Exit value = valuation * money multiple
- Estimate the buyer’s revenue multiple at exit
- Calculate your annual revenue at exit. Annual revenue at exit = exit value / revenue multiple at exit
- Calculate your monthly revenue at exit. Monthly revenue at exit = annual revenue at exit / 12
- Estimate your price per product at exit
- Calculate your monthly number of products at exit. Monthly products at exit = monthly revenue at exit / price per product at exit
- Estimate the number of products per invoice at exit
- Calculate your monthly number of invoices at exit. Monthly invoices at exit = monthly products at exit / products per invoice at exit
- Calculate the monthly total number of customers at exit. Monthly total customers at exit= monthly invoices at exit * invoice interval
- Estimate the life of a customer at exit
- Calculate your monthly number of new customers at exit. Monthly new customers at exit = monthly total customers at exit / life customer