Bootstrapper.com - Confessions of Serial Entrepreneurs

There are 2 ways to look at value. The first is what it’s worth to you, and the second is what it’s worth to someone else. If you aren’t selling your business, then it only matters what it’s worth to you. However if you are trying to sell your business, then it gets complicated. Often times, you will need to justify your valuation and your asking price and there are ways to do that. You can use a revenue multiple, a cash flow multiple, a profit multiple or comparative business sales in your space. You can even back your valuation up with multiple examples and funky regression analysis. And you know what? At the end of the day, you’ll only get for it what someone is willing to pay. Next time someone tells you X private company is Y, ask yourself what someone would be willing to pay for it? That is a far more likely valuation than any seller driven multiple.

From a seller perspective, use examples to justify your valuation but your bottom line price will likely be the most important factor. Know it, understand it, leverage it.

So I was on facebook today and noticed a new feature - chat. Yes, it seems facebook is building needed apps into their platform finally. Facebook is coming close to turning themselves into a true portal. First off, chat in facebook is tied to an existing addiction - facebook so see facebook chat numbers eventually overpowering AIM. It will - just give it some time. FCBK did chat in such a simple way that it will kick ass. Look for video chat in the future.

Now, facebook needs to retool their message system to allow users to host their REAL email and build a REAL search engine or at least do a proper google partnership and they will be able to almost maybe somday justify their valuation. At least I would say great work so far.

A couple of things about their valuation. First off, they are profitable so will never go under so what that means is that they have a $240,000,000 investment fund to invest in themselves over the next few years. They need to turn $240MM in $15MM which is possible. It’s only a 7X return. Your every day average VC is looking for at least 10X in a successful investment. Just some food for thought …