Beta values

WizardJoe

I`m writing a business plan and would like to determine the beta values for similar companies. The problem is that almost all are private. Should I just use the beta values of the nearest public companies, or is there a way to estimate beta for private companies? Could I use their history of previous valuations and compare this to the market, for example?

robertj

WizardJoe,
Since beta is mathematically derived as a ratio between the return on the individual security vs the market as a whole - the individual security needs to have some "history" over time.
While it may be an "interesting" exercise, I wouldn`t expect its existence to have any meaningful positive impact on potential investors and thus I wouldn`t invest much time in developing it.
Again, I would not recommend discussing the valuation (past, present of future) in a business plan.
 

WizardJoe

RobertJ
 
I meant valuation in this case as a means of estimating beta (since I thought that if valuation represents a possible equity value then it could be compared to the market as a whole). Just merely a thought experiment, I will take your advice on it.
 
My goal is to sell the business after a given period of time. I also have an advertising model that will generate revenue. I want to show investors that they can obtain a sizable return this way (through advertising revenue + selling the business). How do I do this?

robertj

Wizardjoe,
 
I`d begin by developing a business plan that describes how the business will be built and how profits will be generated. If (in addition to the above) you can show market and business scalability - that would be a plus.
 
Once you have a road map to a solid, profitable business - you can examine the capital aspects including:
1. How much you need
2. How it will be used
3. Ways to provide the ROI to your investors
3. What you can/will offer in exchange