We first heard about ValuationUP, the financial performance analysis, benchmarking and valuation tool for SMBs when it won the Ignite startup competition at African innovation conference, Tech4Africa, last year. The South African team behind ValuationUP, Gareth Ochse and Kenneth Kalmer believe their startup will help people — even those without financial backgrounds — benchmark the financial performance of the ventures they are growing, selling, buying or advising.
Research suggests that a high percentage of startups fail — some estimate 75%, depending on how failure is defined. “Startups often fail because founders and investors neglect to look before they leap, surging forward with plans without taking the time to realise that the base assumption of the business plan is wrong,” says Shikhar Ghosh, a senior lecturer of Business Administration at Harvard Business School who has held executive positions at a number of technology-based start-ups.
ValuationUP hopes to boost entrepreneurial success rates by helping entrepreneurs understand how their business is doing, its potential, and how it can be improved. The startup says that it assembled a database of over one million financial statements of privately held companies in over 1000 industry groups, which allows them to “accurately benchmark the financial performance of almost any firm.” Kalmer tells us that ValuationUP is most useful for businesses that have been in operation for at least a year.
ValuationUp uses a visual approach to illustrate short-, medium- and long-term performance of a particular business, through three groups of numbers. The type of insight ValuationUP aims to provide to businesses include benchmarks to industry peers, bankruptcy prediction, sustainable growth rate analysis and a full discounted cash flow (DCF) valuation. ValuationUP looks to be especially useful for identifying which factors drive business value and where to focus efforts.
If you’re wondering about how changes in the economy will affect your business, it can also map out the effects of things like a drop in sales, changing working capital cycles, and increasing costs of capital.
For fundraising rounds, ValuationUP can help you figure out how much to raise and at what cost, and if you’re contemplating an exit, ValuationUP provides tools for setting target valuations and recommends improvements prior to the sale.
These tools look to be equally useful for business buyers who would like to gain insight into a prospective deal.
Although businesses that would like to get evaluated are required to hand over their recent financial statements or management accounts, data is encrypted and kept private, says ValuationUP.
The service is tailored for the South African market, but with its global appeal, we hope to see it branch out.