“Startups usually need business valuation during their pre-revenue phase because their condition is difficult to evaluate accurately, given that they do not yet possess operational revenues or marketable products,” Frizon Akbar Putra, Principal Advisor and President of Nilzon Capital, stated in a public lecture on Saturday (9/4). “At that stage business owners would expect high valuations, while investors tend to choose lower rates which promise higher Return on Investment (ROI) rates.”
The lecture, titled “Business Valuation and Financial Reporting Analysis”, was held by the International Undergraduate Program (IUP), Faculty of Economics and Business Universitas Indonesia (FEB UI).
Business valuation, or appraisal, is the general process of determining the economic value of a business, in particular its equity value. Many business make use of business valuation, more so if they deal in the capital market, and assign professional or chartered business valuators to estimate their worth. In Indonesia, Public Appraisal Service Offices (KJPP) are establishments offering business valuation services that are recognised, and subject to the regulations, of the Financial Services Authority (OJK). Clients and doers of business valuation services include owners of businesses, portfolio managers, research analysts, investment bankers, activist investors, and traders.
Evaluation methods, according to Frizon, is important because they allow business performance to be tracked. Business evaluation can predict future changes in value, not only calculate present incomes and book values, and in turn increases the efficiency of a company’s investment decision-making processes. Out of the four approaches employed in evaluation, namely asset-based, market value, income value, and alternative value ones, market value and income value approaches are most commonly used in capital markets and investment banking.
“Certainly an opportunity for anyone to focus on the capital market, because the market, in essence, is not controlled by a few people. Many people are currently taking part in it, in particular university students, who are becoming more active in investment forums. I consider this a very good development.”
Nilzon Capital, an investment and wealth advisory firm registered and supervised by OJK Indonesia, heavily relies on business evaluation. The firm focuses on high quality investment in stocks, security, Exchange Traded Fund (ETF), and alternative investment throughout the world. The company, founded in 2020, went through the second worst economic crisis in the world after the Great Depression of 1929 — i.e. the Covid-19 crisis — during its infancy.
“We see the Covid-19 crisis as an opportunity. Facts state that a majority of current investors are those who first registered for investment accounts in or after 2020. Throughout the 40 years preceding the crisis, the amount of investors in Indonesia’s capital market is less than what we have from 2022 until now. Therefore, this is a very promising business,” Frizon closed his lecture.
