Commonly used method with which you can determine a company value is the Profitability Method. This method is very similar to the DCF method (Discounted cash flow). That’s why we won’t go into much detail here. The calculation method in particular shows many similarities with the DCF method. However, in addition to all the factors of the DCF method, the Profitability Method also assumes the future profit capacity of the company. This usually also includes other values that are important to shareholders. For example, important properties such as a patent, brand, domain name or other potential value-retaining or value-increasing components are involved. This makes it even more difficult to determine the free cash flow. You then have to determine a value for the domain name. No, that is not the eight euros that you pay for it at the domain farmer.
MORE OVER: This method seems too far-fetched for employee participation. Mainly because many employees find it very difficult to understand this. In principle, this does not only apply to the employees, but you yourself (as a non-valuation specialist) will also have a tough job. Experience shows that the simpler and more transparent the methodology is, the more effective the employee participation plan will be. It should be noted, however, that most employee participation plans start with one of the more complicated company valuation methods (often to determine a 0 point), after which a simple version will be used for future calculations. This ensures that a good ‘benchmark’ is set and that it is possible to check whether the simple method offers realistic results.