Thursday, May 26, 2011

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. 

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