Valuing Your Business

What is your business worth? How much of your business should you give away when negotiating with investors?

These are two of the most commonly asked questions by entrepreneurs. While most valuations in start-ups are pretty much a function of negotiation with potential investors, there are still some good rules for determining a company's worth. The one you choose to use depends a great deal upon the circumstances and the age of your business, as well as the purpose of the calculation. Are you going to a bank to borrow money? Are you looking for equity investors? Are you looking to sell your business?

American Express has posted a short piece on valuation. It's worth reading, as it explains the most common methods: book value, discounted cash flow, publicly traded comparables, and transaction comparables.
http://www.openforum.com/articles/4-methods-to-determine-your-companys-worth 

Valuing Your Business

I'll admit it. When I read the Forbes article on valuing a flower shop, I thought of Eliza Doolittle in "My Fair Lady." The article "How to Value a Flower Shop" is worth reading because it uses numbers in its illustration and quotes research facts. The article really lays out the sorts of things that business owners or potential owners need to think about and pay attention to.

My clients often ask how VCs will value their business. This piece gives a good snapshot.

http://www.forbes.com/2009/06/19/flower-shop-valuation-entrepreneurs-finance-taulli.html?partner=smallbusiness_newsletter