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Note
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Reference no. E53
Subject category: Entrepreneurship
Published by: Stanford Business School
Originally published in: 1998
Version: November 1999
Length: 22 pages
Data source: Field research

Abstract

This note instructs on three major methods to value entrepreneurial companies and uses an example to illustrate each method. The three methods are Balance Sheet Valuations, Income Statement Valuations, and Discounted Cash Flow. For each of the three, the note explains the mechanics and highlights common problems with its use. Then, the note discusses when it is best to use each of the methods. Finally, the note discusses some other considerations, including the difference between financial and strategic buyers, the use of industry-specific operating metrics, and some other ways people value start-ups, including using comparables and required rates of return.
Other setting(s):
1998

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Abstract

This note instructs on three major methods to value entrepreneurial companies and uses an example to illustrate each method. The three methods are Balance Sheet Valuations, Income Statement Valuations, and Discounted Cash Flow. For each of the three, the note explains the mechanics and highlights common problems with its use. Then, the note discusses when it is best to use each of the methods. Finally, the note discusses some other considerations, including the difference between financial and strategic buyers, the use of industry-specific operating metrics, and some other ways people value start-ups, including using comparables and required rates of return.

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Other setting(s):
1998

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