# Calculating a company's PE value

Assuming:

• nothing at the company changes
• the two current owners are 50/50 partners
• the $45k net earnings is distributed to the owners each year Buying 1% of the company for$10,000 puts a million dollar ($1,000,000) value on a company that does surveys, which are not new or special, and earns less than$50,000 per year. Your 1% ownership would give you zero decision making say and entitle you to a dividend payment of $450. Without a HUGE amount of growth it would take two decades to get your$10,000 back. Does that seem like a good investment to you? It's not as though you can just sell these shares when you want out, you're stuck. And all of this ignores how exactly a digital survey company managed to have $35,000 of expenses. I would only begin to consider this at 10% for$10,000. Really I'd probably only get involved if I was becoming a 1/3 partner in the business.

I suspect this person isn't actually a friend because the offer at a $2mm valuation is an insult which indicates that your friend has absolutely no idea what they're doing or thinks you're a mark. 30 is not a "usual" Price to Earnings ratio, Apple is priced at a 33 P/E... He offered you a multiple of 15 based on next year's not-yet-earned income relying on not-yet-won clients. It's an utterly wild guess. Valuations are total bullshit. Regarding the specific "offer" you "friend" is making, I pay 10K$ to get 0.02 [possibly 0.5%] percent

Laugh and walk away.

The company is so tiny, it's hard to say it is worth anything yet. What if either of the partners quits the company, e.g. if it stops growing and they lose interest?

That said, you could look at valuations on BizBuySell.com and on this Inc.com chart. This chart is very detailed; even if it is ten years old, you should learn something.