How can you use the liquidation value method to value a startup?

It involves estimating the net cash that would be received if all of the company's assets were sold & liabilities were paid off today. This method is particularly relevant for startups facing potential closure or those unable to continue as a going concern. To determine this value, you need to make a comprehensive inventory of all tangible & intangible assets, including equipment, inventory, intellectual property, & any other valuable assets. Then, assess the current market value of these assets, considering depreciation & potential liquidation discounts. After this, subtract all outstanding liabilities, including debts & operational obligations, from the total asset value. The resulting figure gives you the liquidation value.

?? A startup that tracks its conducted volume and quality is able to identify which sources of leads are generating the most promising opportunities. ??This info might be used to allocate resources more effectively and focus on the potential leads. Also, if you track conversion rates and average deal size, businesses can prioritize high-value deals and make sure that they are dedicating their time ? and resources to the most promising opportunities. Last but not least, you can trace pipeline conversion rates and deal velocity, businesses can monitor the progress of their deals and identify any potential roadblocks early on. ?? This info can hence be used to take corrective action and prevent deals from falling through.

The liquidation value method is not typically suitable for early-stage (pre-seed/seed) startups, as not much IP value may exist. Typically, the liquidation value method makes more sense for companies with more tangible assets.

You can use liquidation method for a startup in two scenarios. 1. Trying to buy a startup cheap. (probably failed) 2. Carving out a part of a company say like a distribution network in a geography which are no longer keen to address. Or a manufacturing unit which they no longer need. In both cases best case scenario is it should be a derivation and not used for similar purpose. Example. I bought (for a client) a small manufacturing unit in Eastern Europe. We had little interest in its manufacturing capabilities but we wanted the license to sell in Europe using that as a depot / assembly. That’s a 10X return for my client. Else it’s just bargaining at a garage sale.