Upfront: Pricing the Private Company: Make a Guess

Private enterprises, like their publicly traded counterparts, must make crucial decisions that often hinge on a clear understanding of the company's value. But finance leaders at many privately held businesses have only a sketchy idea of their organization's worth, according to a survey of 194 senior finance executives by Princeton, N.J.-based Waterford Advisors LLC and its affiliate, corporate valuation firm Numeria Management LLC, together with the Institute of Management Accountants.

Eighty-six percent of survey respondents work for privately held organizations. When asked if they knew the value of their organization, 38 percent of that group said no. Among respondents from private firms who answered yes to that question, only 36 based their knowledge on a professional valuation. Fifty-six percent said that their understanding was based on management estimates, and 7 percent attributed it to wishful thinking. "Without a clear understanding of their corporate value, many [private businesses] may be ill-prepared to realize their potential when seeking equity capital or a buyer," says Peter J. Leitner, CEO with Numeria Management.