[My_little_pony]

Hello All,

My (small) business is going to be (touches wooden head) moving to bigger premises soon and I'm interested in making shares in the company (of which I currently hold 100%) available to my current customers. That in itself may sound a little silly but makes perfect sense when you see my business

Anyhow, as a company we are small, profitable, debt free, cute and hopefully going places (from small to medium with a bit of effort). I've spoken to my accountant, googled everywhere and even managed to cram in a book or two on the MTR and there seem to be a billion different ways of putting a realistic price on a company.

What I'm really looking for is maybe a fairly straightforward layman's equation that can give me an idea of the current company value and of course with projected future earnings taken into account.

My customers are very interested but I'm not sure what to quote.

[Oldtimer]

Without knowing the nature of your business and future growth rate it is difficult to say.
Some of the bankers on the site may be able to give an indication

[lionrock88]

It's important to find out what comparable companies (comps) to yours are worth.

One potential way to do that is to find out what P/E multiples comps are trading at.

You can discount or increase the multiple to factor in your own individual situation, ie. growth forecast, the fact you are still private, the strength of your balance sheet etc. and use that to get some sort of indication.

At the end of the day, there is no hard and fast rule on how to value your company. The price you get and the amount you give away depends on your ability to convince your future investors how great (or not so great) a deal they are getting and whether they think it is worth it.

What business are you in by the way?

[jimbo]

Pretty much as above but you need to also consider the following

The value of your current order book
The true cost of the business so far, i.e fixtures fittings and any associated expenses so far in relation to the business.

[Crocodile]

You don't actually say why you want to sell part of your company.

There is no easy answer to the question you have asked. Basically, it comes down to how much people will pay.

If it is such a good business, why do you want to sell part of it?

[My_little_pony]

Originally Posted by Crocodile

You don't actually say why you want to sell part of your company.

There is no easy answer to the question you have asked. Basically, it comes down to how much people will pay.

If it is such a good business, why do you want to sell part of it?

The reason to sell part of the business is to cover the outlay for the new office refurb which is about $1 mill. December, Jan and Feb are the quietest months for us and although this may not seem a good time to move when opportunities present themselves sometimes they have to be taken.

We have been turning away customers ((well, putting on hold)) for a while now as we are full full full.

Cash would be nice to enable me to take on a couple of extra staff and for their salaries to be covered while I/we start to increase the income they generate. It is never immediate. My investing customers agree that this is sensible and as they have been with me for so long they know the ins and outs of the company quite well.

[jimbo]

Wouldn't it just be easier and less of a headache to simply apply for a loan and invest it into the business?

[Crocodile]

Originally Posted by My_little_pony

Cash would be nice to enable me to take on a couple of extra staff and for their salaries to be covered while I/we start to increase the income they generate.

Of course cash would be nice, it is always nice. But I don't think you have thought this through. The company would no longer be yours once you sold off any part of it. It brings with it a whole new set of potential problems.

I assume you have exhausted all your other financing options?

Your Accountant should be guiding you through this. If he/she isn't, then I would be moving to one that will give you sufficient advice and support.

[KnowItAll]

Look for resources on how venture capitalists work and what good or bad can happen in a seed / 1 round - as this is the first time around that your ownership typically gets diluted.

Term Sheet Hacks looks at some of the worst case scenarios that can happen ( Venture Hacks — Venture Hacks: The Cheat Sheet ) when shareholder / investor agreements are not structured properly.

[My_little_pony]

Originally Posted by Crocodile

Of course cash would be nice, it is always nice. But I don't think you have thought this through. The company would no longer be yours once you sold off any part of it. It brings with it a whole new set of potential problems.

I assume you have exhausted all your other financing options?

Your Accountant should be guiding you through this. If he/she isn't, then I would be moving to one that will give you sufficient advice and support.

Overdraft and loans are agreed with the bank as the first 'debt' for the company, potential investors are aware and figures have been figured into future projections. Accountant has provided everything I need. Provision of accounts to investors will be made as I come up with a 'number'.

Any investment will more than likely account for less that 20-35% of the company.

I can do this on my own but it will be tight over our coming quiet time. Extra cash is always nice to cover eventualities. We are investing to expnd. Expansion is expensive but we are at our physical limit and again investors are well aware of this.

My customers are VERY loyal. We have a customer retention rate of 95% + over the past 3.50 years and because of this they are VERY sold on the product.

Well, this is almost cathartic. Like this