Inside Information

Buried Treasure

Uncover the hidden value in your company.

Entrepreneurs who want to grow their businesses often look for investors to bring an infusion of cash to the company. But first, entrepreneurs must determine the value of their businesses.

"The financial community looks at financial information [to determine value]," says Larry Chiagouris of CDB Research & Consulting Inc. in New York City. "But financial information provides more of a history of where the company has been; it doesn't necessarily give you a road map to what the company will accomplish."

So Chiagouris' marketing, consulting and research firm created the Hidden Value Index, which examines eight characteristics that help determine worth. These are: 1) relations with employees; 2) cost reduction; 3) avoidance of regulatory problems; 4) the capacity to increase revenue; 5) customer satisfaction and loyalty; 6) brand equity of the company and its products; 7) intellectual capital and research and development; and 8) the ability to heighten productivity.

Although most people don't think about company value until they want investors or plan to sell, Chiagouris says periodically determining the value of your business can help you know if it's something in which you'll want to keep investing your money and time.

The Hidden Value Index can be requested by both investors and entrepreneurs; costs range from $9,500 to $20,000.

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This article was originally published in the September 1998 print edition of Entrepreneur with the headline: Inside Information.

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