Examples: Formula Method and Patent Value Predictor
A classical -albeit US American approach is the "formula method", as for instance described at this site (http://www.equityvaluations.com/pubs/revenueruling68-609.html). Its drawbacks are many, the worst, however, that it requires a history of financial data, the more the better. Think about it! What business has been left basically unchanged for more than 5 years? Especially in the "hot and hype" areas such as IT, pharmaceuticals, biotechnology and recently nanotechnology, we have nothing but hope and expectations.
Another interesting (US) concept is the Patent Value Predictor, discussed elsewhere on the Beef weblog. Again, the problem with such methods is that they require a history of data to be complete. On the other hand, for the valuation of US patents, Richard Neifeld and Martin Goffman come closer than most.
I have studied more recently used methods, eg.
v Market Orientation: actual value of future earnings in the market (requires consent about the market)
v 25% Rule: calculation of license fees as 25 % of the gross profit (earnings)
v Return on Sales (profit orientation): net profits in percent of sales
v Cost orientation: replacement cost or cost to design around a technology to be licensed
v Auction: attraction of potential buyers and obtaining of sealed offers
v Money flow: current value of future economic earnings (net sales minus expenses) calculated over life time
and they don't change my fundamental view! Prediction is impossible, but potential can be analyzed and discussed. In the Beef Knowledge Management Platform, I have uploaded several documents which explain the different methods.
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