The calculation of the value of your business is arbitrary, ie. negotiable, until you have several years of operations and corresponding financial data. There are some ad hoc formulas, eg. Berkus method, for early stage valuation, but it’s only a starting point. You may attempt to project your revenue and profits over the next 3 years based on expected growth, and that can help with negotiations.
Foe example:
Year 0 $100k revenue, profit $0
Year 1 $200k revenue, profit $10k
Year 2 $300k revenue, profit $25k
In this scenario, you might argue that your business is worth $1 million, a 3x multiple on projected Year 2 revenue. And the investor might argue that your business is only worth $250k, because your maximum potential future revenue is only $800k per year in Year 6 or 7, and they want a 10x multiple on their investment.
So, you negotiate.
