The market is flooded with capital, and more investors are putting it into private companies. That's just one reason you need to know the value of your business. Here's how to find it.
It seems like something every business owner would know: his or her company's likely price tag. Such knowledge is a key factor in any major business decision. If you're meeting with potential investors, for example, you have to know your company's number--as well as the sums other companies in your industry are fetching--if you want to negotiate a favorable deal. Even if you're not talking to investors or acquirers, a valuation can serve as a reality check on how your business is progressing.
Unfortunately, because so many transactions go unnoticed and unreported, owners of private companies almost always have a tough time determining the value of their investment. So for the fourth straight year, Inc. has partnered with Portland, Oregon-based Business Valuation Resources, a leading provider of data about private company transactions, to create our most comprehensive business valuation guide yet. The graphics, tables, and work sheet on the pages that follow are based on 3,339 transactions completed between January 1, 2003, and September 29, 2006, in 147 different industries. They shed a rare spotlight on the value of private businesses.
What does the data tell us? Companies in the life-sciences, energy, financial services, and technology sectors boast high sale prices and robust sale multiples. Smaller businesses--retailers, plumbers, daycare centers, and the like--are less lucrative. Which leads us to publishing and periodicals. We've wondered how our company, and industry, measure up. In years past, Business Valuation Resources lacked sufficient data on these kinds of media companies. But this year, publishing and periodicals make an appearance. We're pleased to say they're selling in the premium zone, with a median sale price of about $30 million. So now we know a little something more about our industry. In the pages that follow, you will learn more about yours.