Can Twitter Justify Its $11 Billion Valuation?

 In Tech

A lot of entrepreneurs are probably watching the excitement over the approaching initial public offering of Twitter and wondering if they can get a similar valuation for their companies.

After all, your company may be tech-focused and growing fast–especially if you’re on the Inc. 500–and, unlike Twitter, you may be profitable.

The short answer: Don’t bank on it.

Twitter is an anomaly whose value has been somewhat manipulated by investment bankers, a frothy stock market that’s favoring social media stocks and a sort of desperate investor longing for a return to the good old days of the first dotcom boom.

Still, the pricing legerdemain surrounding the Twitter offering could prove an instructive lesson for small-business owners seeking insight on how to value their own businesses–a task usually accomplished by examining free cash flow. So let’s look at some of the available data and see if we can get ourselves to a realistic estimate of Twitter’s value.

Image courtesy of inc.com

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