Fast Lane
Valuable calculations
How to choose high-tech software to determine your company's worth
By Kelly Tomkies
Smart Business Columbus | March 2003
If you're interested in selling your business or buying another, how can you be sure you're setting a fair price? The techniques for determining a company's value are many, and often complicated.
"You can talk with 10 different people and get 10 different opinions," says Leonard Kaufman, president of PriceYourBusiness.com.
Business valuation software like that offered on Kaufman's Web site gives a potential buyer or seller the advantage of time. Users can access the software when they are ready, day or night, and results are instantaneous.
There are dozens of business valuation software packages available through the Web, says Kaufman, so shop around before choosing one. Prices range from $14.95 to more than $300, but that shouldn't be your primary consideration.
"You want to make sure the software has been developed by someone with expertise in this area," Kaufman says. "Then look at how complicated the software is."
Achieving an accurate valuation does not necessarily take a complicated formula, says Kaufman. You need to choose a program that fits your business model and will be simple to use.
Kaufman's software uses a formula that calculates the total worth of equipment and fixtures (at fair market value); inventory (values at seller's cost); leasehold improvements (market value); one year's net income; and adjustments for cash flow and continuity of business.
There are also programs that offer features such as sales projections, financial reports and financing analyses.
"Business valuation software is a good primary tool to use when determining a company's value," says Chris Deeter, a portfolio manager and chief compliance officer with GA Gummer & Associates, investment advisers.
Deeter purchased software through PriceYourBusiness.com when he was considering purchasing GA Gummer & Associates, something he ultimately decided not to do.
"Using the software helped me to make my decision," says Deeter.
But he cautions that software should not be the only tool when determining a company's value.
"There are so many different ways to analyze a business, and this is a good one to use," says Deeter. "But you have to use more than one methodology, simply to confirm the results." How to reach: PriceYourBusiness.com, (800) 350-3311 or www.priceyourbusiness.com; GA Gummer & Associates, (614) 891-4242
