How do I determine the amount of equity that I should provide to an investor in my company?

I have a consulting company which is just incorporated, but yet to commence operations. However, someone has offered to invest $5,000 in my company in exchange for equity. How much equity is that worth?

Investing, Small Business Financing
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May 2017
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There are a number of ways to value a company. One commonly used for small companies is a multiple of annual revenues. Small companies generally carry multiples in the range of 1-3. My suggestion is to find a CPA that does business valuation and get an estimate. Consulting companies often rely on "good will" for revenues and this can be hard to price. Once you have a rough idea for the company's value, then you know what percentage of equity is worth $5,000. Best of luck!

May 2017
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