The $7 Million 7 Years Wealth System

KLE 118: How To Value Your Business

Posted by AJC
February 23, 2011

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The whole purpose of this Bonus Module is to show you how to use your own business as a vehicle to reach your Number.

So, today, I want to cover the basic ‘street smart valuation’ methods for selling (or, part-selling) various types of businesses:

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… and, I assure you, you will only get the $1 mill. if you are already doing really well

Task 1: The best practical advice that I can give you about learning how to value your business is to watch how the ‘sharks’ (sophisticated ‘angel’ and ‘venture capital’ investors) actually do it. Fortunately, that is really easy to do since there have been whole television shows centered around this process: search youtube.com for ‘shark tank’ and ‘dragon’s den’; watch as many episodes as you can … from the investors’ point of view!

You will see these guys offering seemingly low amounts of money for very large chunks of equity; typically 40% to 60% of the business. They aren’t called ‘sharks’ and ‘dragons’ for no reason; but, they view their risks as very high, in most cases, and value their investment accordingly. As a rule of thumb, however, you should expect to dilute (i.e. give away) 20% to 40% of your high growth company’s current value on each capital-raising round (first round is usually $50k – $250k; second $500k – $1 million; third $2m – $5m, and so on.

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