Stripe’s star just keeps on rising. The online payment giant, founded by Limerick brothers John and Patrick Collison, was already ranked as the world’s biggest privately-owned fintech company.
Then in February, amidst widespread rumours of a public flotation, it scuppered all expectations with a high-profile announcement of another employee share sale round. With the tantalising detail that the company’s valuation ahead of said sale had leapt close to 50% to now stand at $91.5bn.
There are good reasons for such a leap. Stripe’s meteoric growth has barely slowed since it was launched in 2011. In 2024, the number of payments handled by the platform grew by some 38%, to reach a total value of $1.4 trillion.
Aside from highlighting Stripe’s phenomenal success, it’s also a story that highlights the importance of business valuations in strategic decision-making. Stripe has held employee share sales before. Revaluing the company – especially in the expectation that its value has increased – lays the groundwork for releasing liquidity from the company and raising capital. And, perhaps, provides the rationale for declining to pursue an IPO.
So what are some other reasons for seeking a business valuation? Here are five to consider:
- Gain Financial Clarity and Confidence
A business valuation is the ultimate snapshot of your current financial position. It takes into account your balance sheets, profit and loss accounts, cash flows, assets and liabilities – everything that a would-be buyer (real or theoretical) would consider in putting a price on your business. Clarity around the value of your business is particularly beneficial if you are looking to secure financing or attract investors. And as the Stripe example perfectly illustrates, you can approach the process with confidence.
- Prepare for Strategic Growth
Are you aiming to expand your business with new premises, enter a new market or launch new products? A business valuation provides you with a roadmap for growth. By understanding the current value drivers of your business, you can identify which areas hold the most promise for future investment. This way, you can prioritise initiatives that enhance profitability while lowering risks. On the other hand, the valuation process often uncovers operational inefficiencies that, once addressed, can significantly boost overall performance.
- Strengthen Negotiating Power
Whether you are considering a merger, acquisition, or partnership, working from the basis of an accurate valuation of your business is absolutely essential during negotiations. An independent valuation acts as an unbiased benchmark that can help you secure better terms, and is formalised through the process of purchase price allocation (PPA). It ensures that you are not undervalued in a deal and allows you to negotiate from a position of strength.
- Support Succession Planning
For many business owners, succession planning is one of the most challenging aspects of long-term strategy. A business valuation not only clarifies what your company is worth today but also provides a framework for future planning. It can highlight potential areas of growth or concern that may affect the transition process. Whether you’re planning to pass the business on to a family member, selling to a partner, or bringing in external leadership, a well-documented valuation can ease the transition by ensuring that all parties have a clear understanding of the company’s value.
- Embedding Sustained Success
A business valuation is more than just a snapshot in time – it’s an ongoing tool for sustaining success. Regular valuations can track your progress, allowing you to make proactive adjustments in response to market shifts. This continuous monitoring helps you stay ahead of industry trends and competitive pressures. Periodic valuations help to benchmark progress and bring certainty to the pursuit of strategic goals.
Ready to take the next step and arrange a formal valuation for your business? Contact our team today.
