Valuing an entrepreneurial enterprise

This article focuses on valuation issues and methods that are related to a closely held entrepreneurial enterprise. This focus is motivated by the fact that the number of small, closely held business start-ups, which we refer to broadly by the term “entrepreneurial enterprises,” continues to grow year on year, and new business ventures remain the primary source for employment growth in the USA and most industrialized nations. Also, the topic of valuation of entrepreneurial enterprises has for the most part been ignored. The traditional approaches to valuation of small, closely held entrepreneurial enterprises are, in our view, wanting in a number of important respects. Simply, traditional valuation methods are modeled in a manner that is applicable to a going-concern business with a history of sales and revenues. That is not the case for an entrepreneurial enterprise as we define it, and thus use of traditional valuation methods is questionable