Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Bloomberg Customers

Magazine

What's Your Company Worth?


Valuing companies under 200 employees is part art, part science. Venture capitalist Michael Gurau suggests using a comparable public company as a starting point. Here's Gurau's back-of-the-envelope guide to valuing small private companies:

1. Look at the valuations of a few average, comparable publicly traded companies in the same industry or sector. Comparable is the key: A startup software company shouldn't compare itself to Microsoft. If the public company trades at 0.5 to 1 times trailing 12-month sales, start with that figure.

2. Because a private company is, by comparison, illiquid and small, knock down its valuation by 25% to 75% from the public-market proxy figure.

3. If the company is operating at a loss, you'll need to discount even further. Then Gurau assesses the startup's product, technology, market, legal, financial, and team risk, and compares it to an average public company. Says Gurau: "Because a small, private company has so much more risk, you'll always be in a discounting mode, but where [the startup] brings strengths, you'll discount less."

Return to the BWSmallBiz December 2009/January 2010 Table of Contents


LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus