Valuation of entrepreneurial businesses

Gerrit Brösel, Manfred J. Matschke and Michael Olbrich

International Journal of Entrepreneurial Venturing, 2012, vol. 4, issue 3, 239-256

Abstract: "A small business is not a little big business" (Welsh and White, 1981) - this also holds true for valuing small businesses. Such companies act in utmost imperfect markets, are generally unique and the forecast of their future profit is rather difficult. These characteristics impede the use of DCF and real option methods, as well as of multiples. Therefore, this paper presents the functional valuation theory as an alternative approach to valuation. Its partial and general models allow a better adaption to the characteristics of entrepreneurial businesses, especially when these models are combined with a Monte Carlo simulation.

Keywords: entrepreneurial businesses; company valuation; decision value; future earnings method; state marginal price model; discounted cash flow method; multiples; real options; functional valuation theory; entrepreneurship; small business; small firms; Monte Carlo simulation. (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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