6

Figure 23.1: Valuation Issues across the Life Cycle

Start-up Rapid High Growth Mature Growth Decline

or Idea Expansion
companies

Revenues
$ Revenues/
Earnings

Earnings

Time

Revenues/Current Non-existent or low Revenues Revenues in high Revenue growth Revenues and
Operations revenues/ Negative increasing/ Income growth/ Operating slows/ Operating Operating income
operating income still low or negativeincome also growing income still growing growtth drops off

Operating History None Very Some operating Operating history Substantial operating history
limited history can be used in
valuation

Comparable firms None Some, but in More comparable, Large number of Declining number of
same stage of at different stages comparables, at comparables, mostly
growth different stages mature
Portion from
Source of Value Entirely future Mostly future More from Entirelhy from
existing assets/
growth growth existing assets existing assets
Growth still
than growth
dominates