Notes

Using Pre Value and Post Value Accounting Spreadsheets
The pre and post money valuation spreadsheet enables a startup company to enter in the exact amount of capital required, the dollar amount of equity the company is willing to sell to an angel investor as well as the post cash flow number that they expect from their sale. This can also be used by a venture capital firm to determine the value of their client's business. This pre and post money valuation spreadsheet was developed to assist venture capitalists in finding high risk investments. Venture capitalists like high risk investments as they have a higher likelihood of receiving less than their investment but with far more potential for generating a return on their investment. Pre and post money valuation is not accounting or economics homework, but rather is a great way to find good values.

There are many reasons why a pre-and post-cash flow valuation may be required for a private investor as well as a venture capitalist. These reasons could include working capital requirements, funding considerations, valuation of an initial public offering or purchase of a small cap stock, the value of intellectual property or business strategy and guidance on how to best obtain additional capital. In all of these situations, it is extremely important that a potential funding source clearly understand the full picture of the investment required, the anticipated return on the investment and the terms of repayment. In fact, pre and post money valuation should be used together from the very beginning of the venture. Investors must know the total cost of the venture and any funding requirements before they will provide any funding.

This spreadsheet enables the financial analyst to quickly determine the cost of an investment. From the spreadsheet, the pre and post money valuation can also be calculated. By using this tool, the financial projections for the company can be determined. The financial projections will show how the company will perform against the forecasts made in the financial forecasts.

The financial projections will also show if the venture will meet its targeted goals. For a venture to meet its goals, it must be profitable. To calculate the profitability of the venture, all numbers other than debt payment must be included in the post-value spreadsheet. Other costs such as staff wages, etc. will also be reflected in the post-value spreadsheet.

Once the business and related financial obligations have been clearly measured, a cash flow projection will be calculated. A pre-value and post value spreadsheet is then required. For a cash flow projection, the financial projections will be based on the actual cash flow from the business during one year. All sources of funding and variable costs are assumed from the start of the project through the end of the project. However, if significant adjustments are required due to unexpected circumstances such as loss of work, employee lay-offs, or equipment damage, the pre-value and post value spreadsheet can be adjusted after the fact.

A pre-value and post value spreadsheet can also be created for a partnership analysis. The partnership will be measured using a variety of factors that will affect cash flow such as the partners' capital, the value of the partnership's equity, the growth rate of the value of the partner's equity, and net worth. Other factors to consider in this type of valuation include the effect of inflation on the value of the partnership's equity, whether the partnership has incurred any debts that require repayment, whether there have been any joint ventures, and any spin-offs or mergers of assets that have occurred. In this type of valuation, the information provided by the pre-value and post value spreadsheet will be used to project the value of the partnership.

These types of financial projections are not perfect, but can provide a general idea of where a business might be in the next five to ten years. Because they take into account many different factors, they may not be accurate. It is important to remember that while a pre-value and post-value spreadsheet can be extremely helpful when determining the value of a business, it should not be relied upon as the sole source of business valuation information. For more accurate estimates of where your business stands financially, it is often necessary to consult a financial professional who is able to provide the information needed accurately and in a timely manner.

Business valuation is an extremely important part of the decision making process of any type of business. Knowing the true value of your business before you decide to sell it is the only way to really make a profit. When preparing for a potential sale of your business, or when you are evaluating potential buyers, the best thing to do is create a spreadsheet to calculate the potential value of the business. With the financial data that is provided by a pre-value and post-value financial analysis, a business owner can easily find out the true picture of the current financial health of their company.
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