Can Business Valuation Software Determine Business Value?

Small business comps

Business valuation software is an effective resource used to determine the inherent monetary value of a company. Company valuation tools are needed for a variety of reasons, including securing financing, showing growth patterns to investors, and determining growth viability.

Getting Started

There are two important steps in the process of business valuation. First, it is necessary to determine why business valuation is necessary at this time. Then, the information needed to determine valuation must be compiled. It is possible for the business to collect the required data or they can connect with a company that specializes in business appraisal services.

There are three possible approaches for determining the value of a business; valuation income approach, valuation market approach, and valuation asset approach. Valuation income approach looks at the company?s earning power and evaluates risk assessment. Valuation market approach compares the sales of a business to the recent sales of a relatively similar business. Valuation asset approach uses the company?s assets to determine overall value.

Business Valuation Software

Business valuation software makes the process of business valuation analysis far easier. The process requires the financial information of the company for the previous three to five years. The primary data required are income statements and balance sheets. This information is then fed into the business valuation software and a business valuation report is produced. While business valuation software does make the process less complicated, it only provides statistical evidence that should then be reviewed by a business valuation firm or individual experienced with business appraisal valuation.

Business valuation software alone may not be enough for companies interested in using the valuation asset approach or the valuation market approach. However, it does tend to work well with the valuation income approach.

There are a variety of reasons a company may wish to undergo the process of business valuation analysis. Because there are a variety of methods which can be used to determine the value of a business, it is often better for a company to find an expert in the field to help them navigate the process. However, those who wish to try it on their own may want to begin with business valuation software.

Leave a Comment