What Are the Best Online Valuation Tools?

When you prepare to sell your business or approach lenders to secure funding, you need to determine how much that enterprise is worth. Obvious as this statement is, it’s easier said than done. 

Similar to a real estate transaction, where setting the right price can mean the difference between a timely sale and months of negotiation and price reductions, accurate business valuation is crucial to sealing the deal. Thus, it is important to use all the resources at your disposal. 

Online business valuation tools are one way to give you a leg up in the process. Read on to learn some of the best online business valuation tools on the market today and how one of these may be right for you.

The Psychology of Business Valuation

Despite the need for accuratacy, valuation is never going to be an exact science. As I point out in another Dealstream article, value depends on a variety of factors: industry, location, competition in your market share, the state of the economy, the amount of goodwill you have established in your community and among your customer base, and even the political landscape. 

The old cliché must never be forgotten: a business is only worth what the buyer is willing to pay for it. As the seller, the special sauce is understanding the psychology and pain points of potential buyers at the exact moment you list your business. 

As with anything you sell, it’s important not to be affected by sentimentality or the sunk cost of realizing your vision. Buyers can’t appreciate these intangibles. Instead, they look at the enterprise as it stands before them and think about what it will take to grow your business according to their own vision.

Right away, you can see the paradox — on some level, you have to guess what a buyer is willing to pay. But at the same time, you have to set aside your own psychological attachments and biases. This makes perfect sense, but it can be a struggle. Minimizing this struggle is the best argument for conducting a robust business valuation.

These 5 Online Business Valuation Tools Can Help

As the name implies, an online business valuation tool is an algorithmic software program or calculator that gives you an estimate of fair market valuation based on financials, assets valuation and/or comparable businesses.

It should go without saying any software tool is simply that — a way to assist you in conducting your own due diligence. Cross-referencing and using different means of valuation, when appropriate, will yield the most accurate result.

BizBuySell

BizBuySell is probably the best–known brokerage platform for buying or selling a business online. Its “Seller Learning Center” breaks down the business sales process into five steps: preparing for your exit, business valuation, attracting buyers, negotiating, and finalizing the deal.

What I love about BizBuySell is that the platform is so user-friendly. It has a calculator to get a quick valuation, then you can obtain a more in-depth benchmark by searching through the 150,000+ businesses in its database. You can also find a business broker through BizBuySell.

What I don’t love about BizBuySell is it’s not a great place to find comparables for niche businesses. Moreover, because its database includes sold businesses, some of the valuation data is outdated. 

BizBuySell charges its customers to list their business; the valuation tools come with access to the platform, along with a free valuation report. You can buy a six-month Basic Listing for $65.95 a month, a Showcase Listing for $89.95 a month, and a Diamond Listing for $199.95 a month. You’ll pay slightly more per month for a three-month contract, slightly less for a 12-month contract. You cannot buy a listing for less than three months.

PitchBook

Founded by John Gabbard in 2007 and acquired by Morningstar in 2016, PitchBook claims to be “the leading resource for comprehensive data, research, and insights spanning the global markets.” Although its main purpose is for funders seeking businesses, you can use the same data to set a benchmark for your own business’s value. 

What I love about PitchBook is that it allows you to tour the platform and see at a glance how you can use their data to value businesses in your industry. The information is truly comprehensive. You can also take advantage of a free trial, though it is unclear what exactly that means; some users claim it is just a walk-through, while others say it lasts a month. 

What I don’t love about this platform is it’s super expensive, and the pricing seems to be all over the place. For a small to mid-sized company, it may not be worth it to subscribe. 

ValuAdder

ValuAdder, an online business valuation platform developed by a privately held company in Oregon, uses a combination of financial insight, software technology expertise, and business valuation knowledge to provide its customers with a range of valuation products. In addition to valuation tools, it has identified key factors that will increase your company’s worth so that you can be proactively engaged in increasing the value of your business before you list it. 

ValuAdder uses “valuation multiples,” or ratios that relate the business value to some measure of its financial performance, to determine what your company is worth. You select your business type and key financial parameters, such as revenue, cash flow, and inventory, and you can immediately see a business value range with average and median values.

What I love about this online business valuation tool is its fresh take on an algorithmic-driven software platform. You don’t need a subscription. Instead, you buy the product or products you need a la carte (they also sell bundled products). For instance, their business valuation software costs $375. For that price, you can run unlimited valuations. And if you spend $500 or more for individual products, you get 10% off. 

What I don’t love about ValuAdder is that its database is relatively small — only 20,000 companies. This limits the number of comparables you’ll be able to use in determining the value of your business. 

BizEquity

“Only 2% of business owners know the value of their company” is the bold claim made by BizEquity, a valuation platform that uses big data to generate business valuation reports. 

What I love about BizEquity is that the platform is easy to use. The software provides three different valuations based on assets and liabilities, operations, and future growth projections. This allows both service-based and inventory-based businesses to evaluate their company’s worth. 

What I don’t love about BizEquity is there are no prices when you hit the pricing tab. This never fails to annoy me as a potential customer — I will always choose a service provider that is transparent. Moreover, BizEquity’s free trial allows you to see valuation data for only 10 seconds, according to one review. 

EquityNet

Unlike some of the other companies mentioned here, EquityNet is designed more for fundraising than it is to determine valuation for sale. In fact, it does something no other platform does — it includes “crowd funding readiness” as a valuation factor. This allows you to prepare a robust funding pitch.

EquityNet has both business plan and analysis software to optimize your funding campaign. Then, through the platform, you can browse investor profiles by location, type, and investment amount in the hope of getting funds.

The platform offers three subscription plans, including a free Starter option that lets you create and publish your business profile and view the investor network. Their Premium DIY plan gives you access to their business analysis software, detailed information about investors, and a way to connect with them for $299 a month. For $2,990 a month, their Full-Service plan includes personalized feedback, special marketing promotions, business plan optimization, and more.

What I love about EquityNet is you can raise investment capital right on their platform once you have evaluated its worth. According to their website, 1,000+ companies have raised over $600M since they’ve been in operation. You can also view profiles of successful campaigns right on their website.  

What I don’t love about EquityNet is it’s not a valuation platform in the traditional sense, relying more on perceived investor value than comparable and asset-based evaluations. That significantly limits who can use the platform.

When to Bring in an Expert

Sometimes, it is better to hire a professional business appraiser rather than to go it alone — even with the help of online business valuation tools. Here are some of the reasons you might choose to bring in an expert:

1. You need industry-specific insights you can’t get from a software program.
2. Your business is in a new or niche industry, making estimates of growth potential difficult.
3. You are seeking funding and would feel better if you had an expert opinion.
4. You need to discuss strategy due to special circumstances surrounding the sale.

There are people who thrive on do-it-yourself projects. Other people feel more confident hiring an expert. If it gives you more confidence when it comes time for the negotiation phase or when meeting with potential funders, hiring an expert is well worth the money.  

Ready to Sell?

DealStream has 100,000 active members around the world that are looking to buy. Using proprietary AI-driven software, they connect buyers and sellers automatically, giving sellers more opportunities to close the deal. You can reach DealStream here to find out more.