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This month's letter to the editors.

To Love Her Would Be Criminal

I was absolutely shocked that the magazine would select Martha Stewart as one of the most fascinating entrepreneurs ["Entrepreneurs We Love 2005," April]. Stewart is not an entrepreneur. She lost the right to wear that badge when she decided to lie, cheat, and steal.

The article says Stewart's decision to serve jail time before the appeals process was a "sacrifice" and a "selfless act." Since when is it a sacrifice for a criminal to pay her debt and face the consequences of her actions?

Doug Bleazard, director of finance,
Marriott Vacation Club International,
Las Vegas

Enter the Dragon

We were pleased to see the PowerShares Golden Dragon Halter USX China Portfolio recommended as a way to profit from the growth of the Chinese economy ["The China Hedge," April]. However, a figure in your article is already out of date. Because of increasing demand from Chinese firms that want access to U.S. capital markets, the number of Chinese companies traded as U.S. exchange-listed securities is growing rapidly. The number of companies in the Halter USX China Index is now 48.

Tim Halter
Managing director
Halter USX China Index
Dallas

Why add more capital to a country that is flush with it and already indirectly controls a considerable amount of our money supply? Why give the Chinese an even larger market in which to invest our money? Instead, I suggest that we focus on finding ways to reduce the flow of our intellectual capital and technology into their country. And we must learn to negotiate with the warrior mentality that Chin-Ning Chu describes in Thick Face, Black Heart.

Jesus Arguelles
President and CEO
Arguelles Capital Access
Los Angeles

Value Proposition

I had a particular reason to appreciate Norm Brodsky's advice to look at EBITDA, not gross sales, when calculating the value of a company ["What's Your Business Really Worth?" April]. I recently had a broker tell me my business was worth $1.1 million even though the EBITDA was $410,000 last year and new business was exploding. Then I found out the broker already had a buyer at that price and just wanted to get a quick $120,000 commission. I didn't sell.

Patrick Bair
President
Chemical & Consulting Solutions
Glen Rose, Texas

We routinely calculate the value of our 15-year-old, closely held company. We determine the EBITDA and then factor for two other things: owner compensation and rent. We make an adjustment for both, given that a resourceful new owner could probably find a cheaper building to rent and pay people less than my wife and I get.

It's also wise to take some money off the table and diversify your wealth when things are good. But always be prepared to put some back on the table if your company can make better use of it. We've diversified ever since the company got on its feet, and it helps us sleep nights.

Christian Fulghum
Vice president
Midori Inc.
Seattle

Norm Brodsky painted an acute picture of how many entrepreneurs overvalue their businesses. I worked at a small technology firm whose management team had a hugely inflated idea of what the company was worth. The board and the founder would even argue frequently about their ownership positions.

All this while the company was generating negative net profit and burning through way more cash than it brought in. As a friend of mine put it, "You can't sell zero, and you can't divide it."

John Gouskos
Owner
Marbus Group
Medina, Ohio

I think Norm Brodsky's method for calculating the value of private companies could also be used to determine what small public companies are worth. In these companies, most of the stock is held tightly by insiders, and the market for available shares is limited. As a result, the stock holders get an unrealistic view of the company's worth when they look at the market capitalization. Brodsky's measure of five to eight times EBITDA is more accurate.

Duane Chase
General manager
Spectrum Organic Products
Petaluma, Calif.

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Corrections

RockStar Games developed Grand Theft Auto. The video game was incorrectly associated with another company in April's "Entrepreneurs We Love 2005." To alert us to an error, write to corrections@inc.com.