Putting a Value on a New Venture

How to perform a back-of-the-envelope valuation of a business that’s still relatively unproven

Sure, there are generally accepted ways to determine what an established private company is worth (BusinessWeek SmallBiz, 4/16/08). But for a relatively unproven venture, the process is really more art than science (some may even think it’s magic or voodoo, or just plain craziness). To be sure, it’s best to have a potential investor suggest a valuation and negotiate from there. To get a sense of how potential investors arrive at a valuation (and how to do one yourself), there’s no need to learn Excel or crank out discounted cash-flow models. Instead, understand the following basic rules of thumb.

by Tom Taulli

Full Story: http://www.businessweek.com/smallbiz/content/aug2008/sb2008088_243611.htm?chan=smallbiz_smallbiz+index+page_top+small+business+stories