16 Feb Business Valuation Software Accuracy: What You’re Missing
Ask Me Anything: The Nuts and Bolts of Selling a Business in 2025
Question:
How accurate are the valuation software programs?
Answer:
There are several websites and/or programs which purport to value a business. A user tends to input data regarding the industry as well as several years of historical financial data and the program computes a value. It seems simple enough, but here is the challenge; These inputs tend to be quantitative. There are numerous qualitative aspects of a business which move the needle such as: competitors moving into the area, the personal dynamics of the owner, and even the ability to grow in the existing facility. Sometimes a business owner is not keeping up with technology or reinvesting in equipment which can artificially inflate profits. These softer attributes can have a material impact on value. As such, one likely needs to be careful relying on these programs. Lastly, the data the program uses comes from the sale of others in the industry. The data cannot tell you if competitor A sold for a high multiple due to new clients and growth and competitor B sold for a low multiple due to health issues. A trained appraiser is likely to be able to offer you a more accurate valuation of your business.
During the 2024 Managing and Accounting Practice (MAP) Conference hosted by the Massachusetts Society of CPAs (MassCPAs), Beacon Equity Advisors presented an AMA (Ask Me Anything) to the CPA firm partners attending. We thought we would share some of their questions and our answers.