Valuing a company is not a perfect science and the final valuation is ultimately a function of what buyers are willing to pay. However there are a variety of key drivers that can help estimate a valuation range for companies. We have created a valuation tool (see here) that allows owners of software and technology services companies to download the excel file, enter their financial and operational information and receive a valuation computation. The tool will look something like this:
As one enters their company’s information in the Your Company column, the formatting dynamically changes, along with the corresponding multiple. The weight column, emphasizes and de-emphasizes certain elements based on their importance, and carries more or less weight into the valuation equation.
Again, this is not a perfect science and ultimately the market bears what a company is worth, yet hopefully this provides some context and a framework to better understand a company’s value, as well as the most critical drivers.