AS you walk around your small business or check your bank balance, you can be forgiven for thinking what you see is the only value your business has.
However, investors often see something very different.
A business with modest assets but strong sales growth, loyal customers and a scalable business model can be worth significantly more than its owner imagines.
Conversely, a company with expensive equipment but weak profits, poor governance and declining sales may be worth far less than expected.
Tomorrow, the SME-focused Zimbabwe Entrepreneurship Exchange (ZEEX) will launch, opening a new avenue for entrepreneurs and small businesses to raise equity capital.
Thus, understanding business valuation is beneficial because ZEEX will involve investors.
ZSE Holdings (ZSEH) says valuation is more than simply placing a price tag on a business.
It is the process of determining what investors may be willing to pay for an ownership stake based on a company’s current performance, future growth prospects and risks.
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Knowing what a business is worth helps entrepreneurs negotiate from a position of strength.
It enables founders to determine how much capital to raise, how much equity they are prepared to offer and whether the proposed investment fairly reflects years of building the business.
Without a realistic valuation, entrepreneurs risk giving away too much ownership or pricing themselves so highly that investors lose interest.
Beyond the balance sheet
Many first-time entrepreneurs assume investors focus mainly on physical assets.
In reality, investors are often more interested in whether a business can generate sustainable profits and continue growing.
When evaluating a company, investors typically consider revenue growth, profitability, cash flows, the strength and diversity of the customer base, market opportunity, projected earnings, and competitive advantage.
They also assess the quality of management, corporate governance and whether the business model can be scaled.
ZEEX has been designed to make this process possible.
Through ZEEX Private Markets, SMEs can register their businesses, structure the financing instrument that best suits their needs — whether equity, debt or another capital-raising product — and, subject to approval by the ZEEX Management Committee, present the opportunity to prospective investors.
This allows businesses to be assessed on their growth prospects, management capability and future earnings potential, rather than solely on the assets reflected on their balance sheets.
Businesses that continue to grow can later transition to ZEEX Public Markets, an SME-focused board where their securities can be traded by both retail and institutional investors.
As they mature, successful companies can graduate to the Zimbabwe Stock exchange (ZSE) or the Victoria Falls Stock Exchange (VFEX), whose market capitalisations stood at US$3,92 billion and US$4,03 billion, respectively, as at July 20, 2026.
A company with strong financial records, disciplined management and a clear growth strategy may, therefore, command a much higher valuation than another business with similar assets but weaker fundamentals.
How businesses are valued
There is no single formula for valuing a business.
Instead, advisers use different approaches depending on the company and its stage of growth.
One common method is earnings-based valuation, where investors assess a business based on the profits it generates.
The stronger and more consistent the earnings, the higher the valuation is likely to be.
For fast-growing businesses, investors may use revenue multiples, valuing the company as a multiple of annual sales rather than profits.
Businesses with substantial physical assets, such as factories, land or machinery, may also be assessed using an asset-based valuation, while companies with predictable long-term cash flows may be valued using a discounted cash flow model, which estimates what future earnings are worth today.
In practice, professional advisers often use more than one valuation method before arriving at a fair value.
Who determines the valuation?
Although entrepreneurs naturally have their own expectations about what their businesses are worth, they do not determine the final valuation alone.
Neither does ZEEX.
Instead, sponsoring brokers, corporate finance advisers and, where necessary, independent valuers assess the company’s financial position, growth prospects and market opportunities before presenting a valuation that investors can evaluate with confidence.
Independent valuations add credibility and help ensure negotiations between founders and investors are transparent and objective.
A practical example
Miner and crocodile farmer Padenga Holdings provides perhaps Zimbabwe’s clearest example of how investors value a business.
According to the company’s 2025 audited financial results, net assets attributable to shareholders stood at US$166,4 million at December 31, 2025.
However, the company’s market capitalisation on the Victoria Falls Stock Exchange at the end of 2025 was already about US$479 million — almost three times its net asset value.
By April 2, 2026, that valuation had risen further to US$1,04 billion as investors rewarded the company’s strong financial performance and growth prospects.
The difference illustrates an important principle of business valuation. Investors were not simply buying Padenga’s mines, crocodile farms, machinery, and buildings.
They were valuing the company’s future earnings potential, its ability to expand gold production, benefit from stronger gold prices, and continue generating returns.
In other words, businesses are valued not only for what they own today, but also for what they are capable of becoming.
Preparing for valuation
Entrepreneurs do not need to wait until they are ready to raise capital before improving their businesses.
Keeping accurate financial records, strengthening profitability, building loyal customers, documenting business processes, reducing operational risks and developing a clear growth strategy can all increase a company’s attractiveness to investors.
Seeking professional advice early can also help founders understand how investors are likely to value their businesses.
For many entrepreneurs considering ZEEX, the biggest surprise may be that their business is worth far more than they ever imagined — not because of the assets they own today, but because of the future they are capable of building.
Come build your future on ZEEX.
