How Much Is Your Private Company Worth?

Do you know how much your company is worth? If you work for a public company the answer is pretty easy — the stock market values your business every day. If you work for a private company it’s a bit harder. In this post we’ll discuss a technique that can be used to estimate the enterprise value of your private company.

Enterprise value is a financial concept that describes the amount of money the market believes your business to be worth. It is often referred to as the ‘takeover value’ — the amount of money required for an acquirer to buy your company at it’s current market price. Enterprise value is different that market capitalization or market cap.

http://spatiallyrelevant.org/2009/08/25/how-much-is-your-private-company-worth/

The challenge with calculating enterprise value for private firms is the value of your common stock or equity. For public firms this is easy – market capitalization is simply the current share price multiplied by the number of outstanding shares. For private companies, however, there is no public market to value your stock on a daily basis.