Re: Valuation of a Private Internet Gaming Company
Google "DCF" to see how to calculate the value of a stream of cash. Clearly if it was a riskless investment, $200k per year growing at close to 100% per year would be worth a great deal. But it's not riskless. Besides the political climate, there are always business risks (competition, loss of key employees, market changes, financial mistatements, fraud, personal liabilities) that mean you have to discount your valuation by a substantial amount to compensate for those risks.
My guess is that if you know the business well and feel confident it has another year of strong profits, somewhere in the range of $200k-$400k would be a good price to buy it for. Obviously you never want to overpay, you want a screaming deal to compensate you if it has large risks. If you feel you can quantify, mitigate, and/or control those risks, the price you pay can go up substantially.
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09-14-2006, 01:14 AM
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