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How we value your company
The frameworks and methods behind every Futurlytics valuation
A valuation is only as credible as the reasoning behind it. Any model can produce a number; what makes that number defensible is its ability to withstand scrutiny from an investor, an auditor, a board of directors or the other side of a negotiating table.
That is why we are explicit about our method. Every Futurlytics valuation is built on internationally recognised standards and on valuation techniques that have been proven in professional practice for decades. Nothing in our model is proprietary in the sense of being unexplainable. What is our own is how we combine these components and how we apply them consistently to the intangible assets that most companies cannot see on their own balance sheet.
Below we set out in detail the frameworks we follow and the methods we apply.
Why standard accounting undervalues your company
Before describing the frameworks, it is worth explaining the problem they exist to solve.
Under international accounting standards, most internally generated intangible assets never appear on a company's balance sheet. A brand you have built, a customer base you have cultivated, the knowledge that resides in your team, the processes that make your operation efficient: accounting standards expressly prohibit recognising them as assets, because their cost cannot be reliably separated from the overall cost of running the business.
The consequence is significant. In a knowledge-intensive company, the assets that generate most of its future profits are often the ones its own accounts are least able to describe. The book value of such a company may bear little relation to what a buyer or investor would be willing to pay for it.
Valuation is the discipline that closes that gap. It does not ask how much an asset costs to create, but how much it is worth. The frameworks below set the rules for answering that question rigorously.
The frameworks we follow
These define the vocabulary, the recognition criteria and the professional standards to which our analysis is held.
Framework | What it is | How we use it |
|---|---|---|
IFRS | The set of international accounting standards issued by the IASB to make companies' financial statements comparable worldwide. | It provides the accounting basis on which we read and normalise your financial statements, so that figures arising from different accounting practices can be compared on a consistent basis. |
IAS 38 | The standard within IFRS that governs how intangible assets (patents, trademarks, software and development) are recognised, measured and amortised. | It gives us the formal definition of an intangible asset: identifiable, controlled by the entity and expected to generate future economic benefits. We apply these criteria to determine which of your intangibles can be valued separately and which must be treated as part of goodwill. |
IVSC | The International Valuation Standards Council, the independent body that sets the global standards for the valuation profession. | Its International Valuation Standards, and in particular IVS 210 on intangible assets, set out the professional requirements our valuations follow: the basis of value, the permitted approaches and the assumptions that must be disclosed. It is the same framework applied in any professional valuation engagement. |
EFRAG | The European advisory body that advises the European Commission on the adoption of IFRS in the EU and develops the European Sustainability Reporting Standards (ESRS). | It keeps our approach aligned with the European regulatory context, including the growing role of sustainability and non-financial information in assessing business value. |
COFI Intellectual Capital Framework | A business management model for identifying, assessing and enhancing an organisation's intangible value. It structures collective knowledge into four pillars: Human Capital, Alliance Capital, Customer Capital and Structural Capital. | This is the framework that organises our analysis of everything accounting standards leave out. It gives us a systematic map of where value resides in a knowledge-based business, so that the valuation is not limited to what appears in the accounts. |
The distinction between the first four and the last is deliberate. IFRS, IAS 38, EFRAG and the IVSC tell us what can be recognised and how it must be measured. The intellectual capital framework tells us where to look in the first place.
Traditional valuation methods
These are the established techniques of corporate finance. Each answers a different question and is appropriate for a particular type of company at a particular stage.
Method | What it does | When it applies |
|---|---|---|
Discounted cash flow (DCF) | Values a company by projecting its future cash flows and discounting them to present value using a rate that reflects risk and the cost of capital. | The benchmark method for companies with predictable, documented cash flows. Its reliability depends entirely on the quality of the projections and the discount rate, both of which we make explicit. |
Black-Scholes | A mathematical formula that calculates the theoretical value of a financial option based on the price of the underlying asset, volatility, time and the interest rate. | Used when value takes the form of an option rather than a certain cash flow: staged investments, licensing rights, or the option to abandon or expand a project. |
Monte Carlo simulation | Estimates value by simulating thousands of random scenarios for the key variables, producing a distribution of possible outcomes instead of a single figure. | Applied when uncertainty is significant. It replaces a false sense of precision with an honest range and shows which assumptions the valuation is most sensitive to. |
Berkus method | Values very early-stage, pre-revenue startups by assigning a monetary value to five qualitative factors, such as the idea, the team, the prototype and strategic relationships. | For companies with no financial history, where projecting cash flows would be an exercise in fiction. It replaces missing data with structured qualitative judgement. |
Venture Capital method | Values a startup by estimating its future exit value and discounting it back according to the investor's required return. | It mirrors how venture capital investors actually price a round, which makes it especially useful for companies preparing a capital raise. |
Comparable multiples | Estimates value by applying market ratios, such as price/sales or value/user, observed in comparable companies or transactions. | It anchors the valuation in observable market evidence. Its usefulness depends on the existence of genuinely comparable peers, which we assess rather than assume. |
EBITDA multiple | Values the company by multiplying its EBITDA by a sector benchmark multiple to obtain enterprise value. | A common reference point for established, profitable companies, and the most widely used language in mid-market transactions. |
Intellectual capital valuation methods
These are the techniques we apply to the assets that conventional accounting cannot capture. They follow the three approaches recognised by international valuation standards (cost, market and income), adapted to intangibles.
Method | What it does | When it applies |
|---|---|---|
Replacement cost | Values an asset by calculating what it would cost today to create or acquire it again with equivalent characteristics and utility. | Appropriate for internally developed assets with no market or directly attributable income: proprietary processes, in-house software or accumulated know-how. It sets a floor, not a ceiling. |
Market cost | Values an asset according to the price at which comparable assets are bought and sold in the market under normal conditions. | The strongest evidence available, where a market exists. Truly comparable intangible transactions are scarce, so we apply it when the evidence supports it and say so when it does not. |
R&D cost method | Estimates the value of an intangible by adding up all the research and development expenditure incurred to create it. | Useful for technology and deep-tech assets where development effort is well documented. Like all cost-based methods, it measures the investment made rather than the value created, and we treat it accordingly. |
Income method | Values an asset based on the future income or economic benefits it is expected to generate, discounted to present value. | The most robust approach when the intangible's contribution to profits can be isolated: a patent that generates licensing income, or a customer relationship with a measurable contribution to margin. |
Relief from royalty | Values an intangible, typically a trademark or a patent, by estimating the royalties the company saves by owning it rather than having to license it from a third party. | The standard technique for trademarks and patents, widely accepted in transactions and litigation because it is anchored in observable third-party licensing rates. |
How the methods work together
No single method produces a valuation on its own. Each has a domain in which it is reliable and conditions under which it is not, and a valuation that depends on a single technique is fragile by construction.
Our model applies several methods suited to your company's stage, sector and available data, and then triangulates. When the methods converge, confidence is high. When they diverge, the divergence is itself informative: it usually points to a specific assumption, such as a growth rate, a discount rate or the comparability of a peer group, on which the valuation really depends. We bring those points to the surface rather than diluting them on an average.
Three principles govern how we do this.
Method selection follows the company, not the other way round. A pre-revenue startup and a profitable ten-year-old business require different techniques. Applying a DCF to a company with no cash history produces a figure with the appearance of rigour and none of its substance.
Assumptions are made explicit, not hidden. Every valuation rests on judgements about the future. Ours are made explicit, so you can question them, adjust them and defend them before a third party.
Ranges are more honest than single figures. When uncertainty is significant, we say so. A single figure to the nearest euro suggests a precision that no private company valuation possesses.
What this means for your valuation
The purpose of this methodology is to give you a valuation you can use in a funding round, a negotiation, a strategic review or a conversation with your own board, and defend when someone competent challenges it.
That takes more than a number. It requires knowing which methods produced it, which assumptions it rests on, where its uncertainties lie and which recognised standards it complies with. That is what a Futurlytics valuation is designed to deliver.
If you would like to discuss how these methods apply to your specific situation, we would be happy to talk it through with you.