

How do i value my 'startup'? - ssgrfk

Hi. I've got a small web business that i run. It's at the stage where i'm talking to potential investors about financing. I have no formal business training and wondering, How do i put a dollar value on my business? We've been profitable for over a year and growth is steady.. Are there some globally accepted formula for these things or can i cash in on the current .com hype and ask for 64 bizillion? thanks
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patio11
The valuation is whatever you and an investor mutually agree on.

If you're "fundable" (targeting a large market, growth is accelerating at a
rate which looks like it will take you stratospheric, team "looks like
winners", in Silicon Valley or NYC, strong social proof from other investors,
etc) then in the current environment at least some investors might agree on
fairly big numbers. If many of these things are not the case, then it is
unlikely investors, if you find them, will agree on valuations that would be
obtainable by "fundable" startups.

There is no universal formula for valuing businesses. If there were, markets
would be a lot less interesting. (The wonderful thing about the standard
formulas they teach in B-school is there are so many to choose from.)

There are also _strong_ regional components to this question. e.g. In Ogaki, a
software business with an enterprise value of $100,000 is newsworthy enough to
warrant coverage in the paper on that fact alone. In the Valley, two kids with
a gleam in their eye are assigned a notional value of $100,000 for an idea
that all parties do not necessarily expect to be the idea they are working on
four weeks from now.

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GFischer
Yes, there are several standard formulas that are taught in MBA Corporate
Finances courses, usually via some variant of Discounted Cash Flow.

They're just a starting point, and might not be accepted by the other party,
but it helps to put a dollar number on your company :)

The Wikipedia article sounds like a good start for your investigation:

<http://en.wikipedia.org/wiki/Business_valuation>

Edit: agree with both soho and patio - your company is worth whatever someone
is willing to pay for it, and there are a lot of "standard" formulas taught in
B-school so you can pick and choose whichever you like.

I still believe that using a formula can help you at least give some anchor to
how much it might be worth. (the discounted cash flow will give you a number
similar to soho's I think)

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soho33
i'm on the same boat as you. we've been proftaible for over a year and a half
now with revenue doubling each year. we actually just went #3 on google for a
very high keyword so it's going to move up even more.

Everyone always told me your business is worth how much smoeone is willing to
pay for it!!

from a formula perspective, personally i would take my annual revenue and
multiple it by 2.5-3. and that's how much a typical investor may pay. However
this depends on many factors. If the business stays stale, they'll make their
money back within 2 years but if the business is growing (doubling in my case)
then they would make it back a lot faster so i might shoot for 4 or 5!

my main problem is actually FINDING people who are interested!

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ssgrfk
Thanks everyone. insightful responses. i think the main true statement is
truly: The valuation is whatever you and an investor mutually agree on. Or :
As much as i can get!

