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Sub-debt loans, price points, capitalist pigs unite, perfecting proposals

By Paul DeCeglie

Opinions expressed by Entrepreneur contributors are their own.

Business owners often fret over how many shares to issue when going public or seeking capitalization. But they may be putting the cart before the horse, according to experts. "First of all, there's no concrete answer," says James B. Arkebauer, founder of Venture Associates in Denver. "There's no formula. There are huge variables--the business owner looking for $100,000 to fund an ice cream store versus the person seeking $10 million to do an Internet IPO and all the variations in between."

The first step is to determine the amount of money you want to raise, then decide what percentage of your business you are willing to give up in return for the proceeds--all of which must be predicated upon valuation of your company. For an existing business, Arkebauer suggests, "quasi guidelines begin with the familiar P/E [price/earnings] ratio and the valuations other companies in the same industry are getting." To help with the latter estimate, research IPOs during the last 24 months.

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