+612 9045 4845


DCF approach to valuations based on Customer metrics

For a business with little or no revenue or profits, and a less-than certain future, determining a business valuation is tricky.  Copperstone Capital has developed a valuation methodology based on seminal work at Wharton Business School in the USA that uses familiar customer metrics to build a cash flow model.  Combined with options analysis to model the risk of a startup, this approach give founders insight into their business worth.

Determining a Discount Rate

There is a large body of work that can be used to determine an appropriate discound rate. Copperstone Capital uses the basic Capital Asset Pricing Model to determine a base discount rate but then adjusts for liquidity and size issues.  Risk of failure is not incorporate but is dealt with seperately.

Valuing Risk of Failure

We keep hearing about the risk of failure in a startup, so how should that risk be reflected in a valuation?  Copperstone capital uses option theory to model this failure risk and is building up a strong database of performance to validate the probabilities.