Every day, small business owners work long hours to keep their dreams afloat until retirement, a health issue or an unsolicited purchase offer forces them to put a dollar amount on their life’s work.
Obtaining a business valuation can cost thousands of dollars, though, making it unaffordable for most small business owners. NYC startup Baton provides free valuations to small businesses so they can know their worth before passing the baton to a new owner.
The startup, which announced $2.8 million in pre-seed funding on Monday, is working to build a massive small business valuation database that will lay the foundation for a two-sided marketplace. The marketplace will allow small business buyers and sellers to connect and begin negotiations around a valuation calculated by an objective third party.
“There really isn’t a marketplace that exists that can bring trust and transparency, where both sides of the equation – the small business owners and buyers — have a third-party evaluation, someone that’s bringing both parties to the table and providing that structure,” Baton co-founder and CEO Chat Joglekar told Built In.
The $2.8 million pre-seed funding round was led by Giant Ventures with participation from Bloomberg Beta and the founders of Casper and Block Renovation. The funding will help Baton launch its web platform that allows buyers to search for small businesses based on business type, location and past sales data.
Small businesses will also be able to search for potential buyers on Baton’s marketplace. Baton will receive a commission on any business sale conducted through the marketplace.
Joglekar previously worked as a vice president of sales strategy and operations at Zillow. He said Baton’s small business valuations are similar to a Zestimate, a data-backed value estimate that Zillow assigns to every house on its platform.
“If you talk to any buyer, they’ll say the hardest thing is to find quality businesses to research and decide to put a letter of intent on,” Joglekar said. “If you talk to a small business owner, they’ll say they don’t even know where to start on selling.”
Small business owners can get started with Baton by importing their financial records from QuickBooks, which Joglekar said is used by about 80 percent of small businesses. Baton also asks the business owner to answer 14 questions about their real estate arrangement, personal salary and other factors not typically available in QuickBooks.
Baton has provided free valuations to more than 500 small businesses, including to two Brooklyn-based wine shops owned by Lily Peachin.
Peachin reached out to Baton because she was considering selling one of her shops and investing that money into the other shop. In addition to providing a free business valuation, Baton provided her with actionable data insights and connected her with a small business advisory firm to help her increase the value of her business.
“I’d always wanted to know what my businesses were worth, but I really had no idea,” Peachin said in a statement. “And I also considered: how is it even possible that I have no idea what my business is worth? I look at my sales every day. I pay my bills, negotiate leases and understand so many other facets of what we do, but I really didn’t have a clue what my valuation was.”
In addition to the businesses that it has worked with directly, Baton has calculated another 4 million estimates for small businesses based on publicly available data such as federal, state and county government databases.
Baton, which has a coworking space in Manhattan, currently has eight employees, five of which live in New York.
