This article introduces a formula to assess the total
value of privately held family businesses from the
owner’s perspective. It is argued that the total value
of a business is not only composed of its financial
worth and private benefits, as is usually assumed by
traditional financial theory, but that emotional
components also have an impact on valuation. In
particular, it is assumed that emotional returns (ER)
positively affect total value, whereas emotional costs
(EC) negatively affect total value. Even though every
stakeholder faces emotional costs and returns, it is
solely the family business owner who ultimately decides
on the worth of a business and consequently factors
ER-EC into his or her valuation. The presented formula
provides a better understanding of investment decisions
in family businesses and a more accurate valuation of
these businesses. pdf 2008
