How to value a company

[vex]

On the sporadic quest for funding how do I value my company to be able to get an idea of how many shares to give away for investment.

I know there is a considerable of finger in the air or 'goodwill' type how much are relationships worth that needs to be considered but how do I at least start.

Vex

[aceparts_com]

I'm as keen as mustard to hear the results of this one.
My calculations show my new company should make a realistic profit of between £0 and £60,000 per week, now how do you value that?

[poorcardealer]

7 X NET PROFIT ??

[rico]

aceparts_com said:

My calculations show my new company should make a realistic profit of between £0 and £60,000 per week, now how do you value that?

You go on actual earnings. The dotcom boom kinda killed potential earnings.

[aceparts_com]

rico said:

aceparts_com said: My calculations show my new company should make a realistic profit of between £0 and £60,000 per week, now how do you value that? You go on actual earnings. The dotcom boom kinda killed potential earnings.

Anyone want a share @ 7 x £0

[ettore]

depends on what the company does - services, product etc. There are then loads of other variables including ip, quality of clients, competition etc etc.

[Prof Higgins]

Discussed this with our accountant a while ago. He mentioned a valuation system based on super-profits - from what I could gather super-profits were profits less the salary required for director substitution. i.e. If company makes a pre-tax profit of £100k and it would cost £50k to put someone in to cover the day to day job of the owner/director then super-profits would be £50k. A multiple of this figure can then be used to value the company (think we discussed 3-5 times being average) plus of course the value of any assets.

Srebbe64 or Eric will probably be along shortly with better advice.

[djohnson]

Bad news is there is no simple method. The accepted methodology is to apply a multiplier to earnings. The multiplier (or price earnings ratio P/E) varies from industry to industry although a look at the P/E ratios of quoted companies in your industry in the FT may give you an idea. Alternatively venture capital and private equity deals often get a lot of local press - you could use this information to find a similar business to arrive at a P/E. Even having done thta there are many other factors which will still play a part. Best advice is if you are serious then speak to an acountant who sells Corporate Finance services - many will work on a contigent fee basis ie if they don't find a deal for you - no fee.