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Avoiding the .com Issue: Valuing an Ecommerce Company

Posted by Business Valuation Specialists LLC on Feb 1, 2019 8:05:00 AM

Valuing an eCommerce Company

When you're considering investing in a tech company, it's easy to get caught up in all the hype with the latest and greatest being pushed by the company. But when you're not familiar with all the specifics, how do you know whether you're really buying the next Apple, Microsoft, Evernote or Intuit or if you're just throwing your money at the next big bust? This was the problem faced when the .com bust took place not that long ago. Fortunately, there's one way to help make sure you're making a smarter investment - by valuing an ecommerce company with a certified appraiser. Here's why it makes the difference.


Avoiding the .com Issue: Valuing an Ecommerce Company

Today, digitization and tech are taking center stage because of their potential for transforming our society as a whole. However, that doesn't mean that every tech company is a solid investment. To get an idea of where companies sometimes fall short of their hype, we're going to take a few minutes to look at the past - specifically, the .com bust that happened in the late 1990s. As the internet began to grow significantly in popularity and more companies began selling their products online, the companies that incubated this boom became very popular, and tech companies specifically suddenly found themselves with a lot of eager investors knocking at their doors, investors who often didn't understand what the company did or whether it had a solid plan in place for success.

As the market grew, these companies would spend ridiculous sums of money on fancy office furniture that was far more than was needed for their situation, executives were paid huge bonuses and amazing presentations were made on the company's potential, but in the end, the young leadership was often unable to anticipate many of the issues that came up due to competition, a quickly expanding market or changing conditions that made it difficult to adapt. Because these companies didn't take the time to build solid value, their investors were left with very little when they folded, causing huge shakeups in the market.

Today's digitization trends have investors in a similar quandary. Companies pushing IoT, mobile, cloud computing, automation and so much more are tooting their own horns to gain ground in the market. But unlike the .com bust, there's a better option than simply taking the company at its own word to determine its actual value and potential. The past several decades of digital business have provided significant data towards determining the actual value of a company and what aspects of that company to consider when trying to determine that company's value, both current and future. By having a solid business valuation performed, you'll have all the information you need to make an intelligent decision.

Instead of risking throwing good money away on a bad investment in a tech company that talks big but is short on details, using a certified business appraisal specialist for valuing an ecommerce is a great way to ensure that you're making a wise investment. However, make sure that the business valuation specialist has both experience in working with tech companies as well as a solid certification. Why? The certification process teaches the appraiser to use standardized methodologies that have been tested for decades in legal, financial and tax industries, providing you with solid reliable results that you can take to the bank.

Topics: Valuing an eCommerce Company