Beta values

WizardJoeWizardJoe Posts: 1subscriber
edited September 2008 in Startup Funding
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?

Comments

  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    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.
     
  • WizardJoeWizardJoe Posts: 1subscriber
    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?
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    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
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