Comparing Valuation Tools

One of the most common questions that business owners ask us is “what’s my business worth?”  The most effective way to answer this question is to purchase a comprehensive valuation report; however, you have options.  There are three general categories of valuation reports at your disposal, each with their own pros and cons:

1. Free Online Valuation Tools

Spend a little time on Google and you can uncover a variety of free online valuation tools. Like most things on the web, they vary in their complexity and accuracy. The biggest benefit is that they are free, and most are quick and easy to use. They can provide a good starting point for someone who is curious about their company’s value; however, they lack the sophistication of comprehensive valuation reports.

Before designing our Business Value Calculator (http://www.bridgeventuresllc.com/calculator/bvc.html), we spent considerable time testing other free online tools. While we agree that a comprehensive report is more thorough and precise than any free tool, including ours, we believe that we created something that stands out in this category.

2. Do-It-Yourself Software

A few companies sell software allowing you to do your own valuation. Most cost between $300 and $1,000 and allow you to create your own comprehensive valuation report for a fraction of the cost of hiring a third-party. These software packages, however, simply contain calculators and report templates, and if you don’t have valuation experience it will be a very time-intensive project. By the time it’s done, you may have wish you hired a professional firm.

3. Hiring a Third-Party

Hiring a professional valuation or M&A firm to produce a valuation report is the best option if your goal is to receive a comprehensive, completely objective view of your company’s value. While these reports are more expensive than the previous two options, you will receive a 25+ page report that covers operational, financial, industry, and general market conditions that affect the value of your business. It will assess your business from multiple points of view, combining 4-6 different valuation methods in order to provide the most accurate results.

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