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Valuing non-traditional firms is a technical challenge. Here’s what you need to know
05 December 2017
It is technically challenging for those trying to value companies in the tech sector. There is a widely-accepted toolkit for valuing mature, asset-rich, cash-flow businesses. But no such agreement exists for non-traditional firms. Why is it so hard to agree on the best and most reliable methods? And what can be done about it?
The best starting point is to think carefully about why we act as we do in a conventional valuation. With that knowledge, we can then make judgment calls about when to apply those methods to tech-firm valuations.
People attempting to value non-traditional businesses, especially those in the tech sector, face five key challenges:
