James Caan on valuing your business [Video]
It's not the number you've arrived at, it's how you got there that's important, says James Caan
Having witnessed numerous pitches in his time on Dragons’ Den, it’s hardly surprising that serial entrepreneur James Caan is quick to identify his biggest turn off in a business’ pitch – the valuation.
Sharing his experience of start-up proposals, Hamilton Bradshaw founder Caan explains that when “the valuation is ridiculous […] it really does annoy me because it’s insulting my intelligence”.
Discussing his issues with company valuations, Caan comments:
“You can value the business however you want – it could be £100m, £1m – the number doesn’t really concern me, it’s how you get to the number.”
For businessman Caan, it’s the process of how you’ve valued your business that really matters and you need to have market research, revenue figures, and growth potential to enforce your valuation.
Caan sums up his concerns about valuing a business within this scenario:
“When someone sits in front of you and says I’ve just come up with this cushion which you can lean on when you’re on a bus. The cushion market is £400m and I’m only looking for 10% of that market so £40m. Therefore I think my business should be valued somewhere around £5m.
“[You ask them] have you sold one yet? No. So you’ve got a cushion that you haven’t sold but it’s worth £5m!”