We aren't the authors of the business plans we publish, but as I go through the sample plan and look at the financial strategy, including the $200 million valuation that InteliChild.com sets for the end of the plan, that's an objective. The founders of that company set as an objective that the company should be worth $200 million at the end of those three years.

Numbers like these are not as simple as just pulling them out of the air, however. Normally you want to use some reasonable arguments for why your company should be worth whatever you set as its future valuation. You use valuation formulas such as multiplying times sales, or times profits. In the case of InteliChild.com, for example, the $200 million valuation would be 8 times sales in the final year. That compares to other Internet companies of similar size at the time that the InteliChild.com plan was completed. The developers probably looked at public offerings of Internet companies at the time, and assumed that if they could build sales to $25 million as they planned, then they would be worth $200 million. The market has changed since then, and if InteliChild.com were developing a plan right now, those numbers might be different.

There are some good questions and answers about valuation in the Ask the Experts. You can go to that site and do a keyword search for "valuation" to see some of those additional questions and answers.

Tim Berry