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Business valuation software - Are they worth it?

Business valuation software - Are they worth it?

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Hi

I have been asked to prepare a business valuation for a client who is looking to sell their business.

I have seen a package called the Valuer which seems very good but I wondered for the cost whether other members just draft a valuation out on Excel/Word or do they invest in these packages?

I'd expect the goodwill of the business to be worth say £750k and so my thinking is to purchase a package like this so that the valuation report can look top notch for the client rather than a few spreadsheets.

I would be grateful for any views on this subject and also if any users of Valuer or related software could give their input then it would be much appreciated.

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By JamesPrice
14th Apr 2011 11:24

Avoid

I've never looked at valuation software for the simple reason that if I didn't feel able to communicate the main considerations in my valuation through either a long or short form report, and support it with meaningful calculations, then I probably shouldn't be accepting the instruction.

They're probably better than I give them credit for, but there's so much judgement and subjectivity in valuation work I can't see how they cover all bases. My advice would be to ask yourself why you believe the goodwill is worth £750K and start typing and crunching numbers! Always worth asking a colleague or associate to perform a logic check as well.

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By SE
14th Apr 2011 12:35

Business Valuations

I agree that valuations are subjective as there are a number of circumstances that can alter the value.

However, the benefit of business valuation software is that it provides an indicative value based on a variety of valuations methods. That gives you a great starting point for futher discussions with the client. These indicative valuations take minutes as opposed to hours so there is also a significant time and cost savings.

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By JackJoshua
14th Apr 2011 13:22

Re James

I'm confident in my method of calculation and can also write and explain my calculations for no problem in perhaps a 3-4 page report.

I would look at valuing the business as a multiple of its net profit as it seems the fairest way for the type of business it is. However these packages seem to produce reports of about 14 pages and discuss the different ways of valuing of the business before deeming these methods to be irrelevant.

Is this padding or is this what is expected nowadays?

 

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By JamesPrice
14th Apr 2011 15:55

Depends

Personally I would acknowledge the existence of other valuation techniques and briefly explain reasons for not using them, but not pages and pages on what, ultimately, is irrelevant. I saw a report recenty where there was a full page (plus appendix) on BDO's PCPI, but they didn't even use it when determining the multiple. Personal choice I guess but if you were judging two reports do you really want to read stuff that has no bearing on the conclusion?

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Nichola Ross Martin
By Nichola Ross Martin
14th Apr 2011 16:24

Depends on easy of use and cost?

If it was not too expensive one might tempted for the fun of it. However, I wrote an Excel valuation model a couple of years ago - it was handy for valuing a specific type of business in one sector for private equity but to be completely honest I found it hopeless for anything else, and in the end quicker to go back to first principles of "back of a fag packet and a finger to the wind". That last bit was a joke, but what we really do is treat each one separately and make whatever adjustments are necessary according to the variables - and there are no shortages of variables when you are valuing private companies. 

So, I would not waste time with software, unless of course you are targetting one sector and then it might be a good way to benchmark.

Virtual tax support for accountants: www.rossmartin.co.uk

 

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Mark Lee 2017
By Mark Lee
14th Apr 2011 18:29

Hmm

Client wants to sell his business and wants to know what it might be worth.

Your valuation is for the client's purposes only. He/she may be ahppy with a back of a fag packet figure. Or a more substantial report MAY be required.  BUT ultimately what matters is what a prospective purchaser thinks the business is worth to them. Neither you nor any software programme can anticipate all of the circumstances that will affect the value in the mind of a prospective purchaser. 

Whether your report is 2, 5 or 15 pages long it will rarely be enough to persaude a purchaser of the figure they should pay.  The client wants to sell the business. He/she doesn't want a report - regardless of who produces it.

Mark

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By crook
04th Jul 2011 14:07

Revolutionary software

This revolutionary software is very effective in business valuation and will generate special features for users in a very short time.I was in wait of such kinf of innovative software that's why really happy and will implement this plan very soon to promote my business.

http://www.ibankr.com/

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