Factors in Valuation

There are several factors that, although they vary by situation, are involved in valuing the idea. The first factor, and the starting point in any valuation, is the nature and history of the idea. The characteristics of the idea and the industry in which it operates are fundamental to every evaluation process as are the risks involved and the company’s ability to withstand any adverse conditions.

The valuation process must also consider the outlook of the economy in general as well as the outlook for the particular industry. This second factor involves an examination of the financial data of the industry in the national and global economies. Management’s capability now and in the future is assessed, as well as the future markets for the idea and whether these markets grow, decline, or stabilize, and in what economic conditions need to be addressed.