10 Rules for Valuation

10 Rules for Valuationby TIM BERRY on DECEMBER 7, 2007 in BUSINESS PLANNING,PLANNING FUNDAMENTALS,VENTURE CAPITAL Read more: http://timberry.bplans.com/2007/12/10-rules-for-va.html#ixzz1HdGebFFc

I really don’t like the word “valuation”; it sounds too much like an MBA buzzword. But I like even less the general confusion about the concept. We talk about starting businesses, we talk about running businesses, getting investment, getting financed, and we should take discussion of valuation for granted. Valuation is at the same time frequently necessary, obvious and extremely arcane. It is nothing more than what a company is worth. It becomes necessary more often than you’d realize, with buy-sell agreements and tax implications after death and divorce, plus financing and investment. It’s obvious because a business is worth what a buyer will pay for it. And then it breaks down into complex formulas and negotiations.

So here are 10 (I hope simple) rules for valuation.

  1. 1. Valuation is what a company is worth. It’s like what a house or a car is worth–less than the seller says, more than the buyer says.
  2. 2. A company’s ownership is almost always divided into shares. Let’s say your company has 100 shares, 51 yours and 49 your co-owner’s.Valuation
  3. 3. Valuation equals shares outstanding times the price of one share. If the company is worth $500,000 and there are 100 shares, then each share is worth $5,000. (OK, there are exceptions, preferred shares and such, but leave the fine tuning for later.)

4 ….
Read more: http://timberry.bplans.com/2007/12/10-rules-for-va.html#ixzz1HdGPVUAT

From PaidContent: Why Apple’s New Subscription Policy Will End Up Hurting Apple, Too

Here’s an interesting discussion on PaidContent.org (a site we talked about in last night’s class) about the rationale and impact of Apple’s decision to collect a 30% on subscriptions, which we talked about in class:

Why Apple’s New Subscription Policy Will End Up Hurting Apple, Too | paidContent.

Guardian’s live geo-based Twitter network

Remember my business idea, the one that I’m still finding the best elevator pitch for?

Well, Matthew Wells (@mattwells) from the Guardian, who I met through Jeff Jarvis (before I had even met Jeff in person) is behind a very similar project: a real-time geo-based feed of vetted network of Twitter users throughout the Middle East.

Politico’s Dirty Little Secret

Several million people will read the website Politico next month. Yet only a tiny fraction of these folks will actually pick up a hard copy of the publication, which circulates for free throughout the Washington D.C. area. Here’s why I note this. According to a case study by CSJ, Politico’s newspaper accounts for nearly two-thirds of the publication’s revenue. The circulation number cited in the study is something like 27,000. I wonder where or what shape Politico might be in if it didn’t have its print component. On the one hand, it’s essential to the site’s business model (a model that’s still operating largely in the red). On the other hand, it remains a secondary consideration for John Harris and Jim VandeHei, who dreamed up Politico only four years ago. They envisioned a publication exclusively on the web. They were reluctant to accept a print side to Politico, even at their financial backer’s urging. Eventually, they gave in. And, if we look at the streams of revenue, probably for the better. It leaves me scratching my head. How essential is print to our online ecosystem? And to what extent does print revenue still propel the news gathering and content that becomes the source for online consumption?