I'll share two methods we used to value crowdSPRING when we sought our
initial seed round (we shared both methods with our prospective
investors).

A) MULTIPLE OF CASHFLOW METHOD. Different industries use different
multiples of EBITDA to value businesses. Do some homework, find the
current multiplier for your industry, and determine if it is the
correct one to apply to your projections. For instance, when we were
doing the initial valuations for our own financial modeling, we looked
at 2005 multipliers for several relevant industries. Different
industries have different multiple benchmarks and at that time
Internet businesses had an EBITDA multiplier of 39.83 and the
advertising industry was 10.83. We took a conservative approach and
used a multiplier of 3x for our valuation using this model model. (we
generally used very conservative numbers across the board - you should
do some research based on your location [we're in Chicago] to find out
what makes sense for you).

B) CASHFLOW CAPITALIZATION METHOD. This is a bit trickier, but this
more sophisticated method returns a typically reliable valuation. To
determine value using this method, you must first determine the
Present Value of your “free” cash flows for the first 5 years of your
business (the “Planning Period”) and the second 5 years (the “Residual
Period”). This model takes into account your assumed Cost of Capital
(or “Discount Rate”), your projected revenue (and your projected rate
of revenue growth), depreciation of your assets, your working capital,
and your capital expenditures to arrive at your projected Free Cash
Flow.

Finally, you may want to present your potential investors with the
projected CAGR (compound annual growth rate) for their investment such
that they can have an idea of the future value of their investment.
This number, presented as a percentage value, is arrived at by using a
formula (where ending value is the present value of your Planning
Period, the beginning value is the total of your capital raise, and
the number of years is the number of years in your Planning Period).
You can view the formula here: http://www.financialtrader.org/defined/c/CAGRFormula1.gif

Ross