Selling a Business Blog

From Forbes: How to Value a Young Company

Say you're lucky enough to find a willing investor in your young company. At some point (sooner rather than later), the guy will want to know: "How much do I have to pay for a slice of the pie--and how big a slice can I get?"

Placing a valuation on young companies is a tricky, subjective game, but it's one small-business owners have to know how to play, especially when investment capital remains stubbornly scarce. Quote too low a figure, and you'll give away the store; shoot too high, and the investor may blanch at your grasp of the underlying economics of the business.

Here are three techniques, some broken into parts, to help you put a value on your company. Your best bet is an amalgam of all of them. When it comes to impressing investors, the more ways you can speak their language, the better.

Technique No. 1: Asset Valuation

Of all valuation approaches, the asset approach--placing dollar values on all the assets on a company's balance sheet and adding them up--is the most concrete.

Start with physical assets, including machinery, office furniture, computers, inventory, prototypes (and the cost to develop them). Young companies tend not to have much in the way of physical assets, but add up what you do have.

Read the full article at Forbes