Business Valuation-what is my company worth?


Hosted by Dave Dambro (or Mark N. Bass, or Ken Honeyman), The Capital MatchPoint, www.capitalmatchpoint.com, 770.433.8250...by virtue of my position at the capital matchpoint, i have the opportunity to talk to entrepreneurs on almost a daily bases, entrepreneurs that are seeking capital at various stages of funding. And one topic that our conversation almost always gravitates towards is, "what is your company worth?". And after we talk for a few minutes, the answer usually comes back as something vaigue or maybe just simply an "I don't know". One thing that I cannot stress enough is that you, the entrepreneur, regardless of what the investors done, because they are going to form their own opinion about what it is worth. But you, the entrepreneur, seeking funding have a very fact based, analytical opinion of what your company is worth. Now valuation is as much art as it is science. Everybody has their own way of doing it. This investor will think, that this is important and someone else will think that something else is important. So, what I generally recommend is that you take as least 3 methods of valuation and look for convergence around a number. Chances are if you get convergence around a number, you are on the right track. Whether you like that number or not, I don't know but, it means you are on the right track. There are a lot of differend methods of doing valuation but 3 that I would recommend that are widely used and our investors will understand them are:
#1. Price to Earnings Ratio
#2. Price to Sales Ration and
#3 Discounted Cash Flow Method
Price to earnings ratio requires you go out and do some research on pubically traded companies in your market. place. Find out what they are trading at compared to your company. Price to sales is done very similiarly except that instead of using ratio of price to earnings you use it to sales. This method is used alot in industries that do not have a clear path to profit. It is a surrigate way that the market uses to assign value to a company. In the Discounted Cash Flow Method, you need to make some projections about your companies cash flow out into the future. Five years if you can. Three years minimum. Discount those cash flows back to the present and arrive at a value of your company. Again, your opinion and the investors opinion may differ but you need to be armed with something to negotiate with. Or, if you'd like soem help in establishing your valuation, call the capital matchoint.

Comments

2 Responses to “Business Valuation-what is my company worth?”

  1. Anonymous says:

    Mark.

  2. Anonymous says:

    Thanks for this Dave.

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