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Mathematical vs. Economic Dilution of Startup Equity: Thinner Slices of an Extra-Large Pizza

Gust

Entrepreneurs frequently think of equity primarily in terms of percentages such as 50/50 or 40/40/20 — not necessarily a bad idea at inception, or even throughout the lifecycle of a traditional business, such as real estate, where cash distributions, capital contributions, and allocations of profit or loss for tax purposes can be made accordingly.

Dilution 162
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Business Valuation: Determining The Worth Of A Company

YoungUpstarts

Simply put, this approach lists a company’s total assets, deducts total liabilities, and determines overall value based on the difference between the two. Also referred to as Book Value . This means that if a purchaser were buying your firm for 1 million dollars, he now needs to pay 1.5

Valuation 132
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Should you include your sweat equity in a business plan?

Berkonomics

Investors love it when entrepreneurs draw little or no money from their startups. That amount is almost always higher, much higher, than the amount budgeted for the entrepreneur. But the tax effect would be the same if audited – you would owe tax on the booked value even if not paid in cash. A “messy” solution.

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Include your labor value in your plan.

Berkonomics

Investors love it when entrepreneurs draw little or no money from their startups. That amount is almost always higher, much higher, than the amount budgeted for the entrepreneur. You could start by charging more for your executive salary, then paying out less in cash, accruing the rest into a payable amount due to the entrepreneur.

Salary 96
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VC Governance FAQ: (2) Especially now, when transparency is so important, why is limited financial information available from a private company?

Pascal's View

Putting that point aside, for a moment, what is absent is a quoted liquid market in their equity and debt securities, which means that the determination of the book value of those private companies is necessarily subjective.