Software Valuation

Software, apps, and any other digital products are intangible assets, and it can be challenging to determine their value. Many software developers and companies are often approached to purchase or have them sell their software. In this case, getting a valuation for software is a must.

Valuation of Software

A software valuation determines the value of a software using three valuation methods. This is normally required as part of the purchase and sale of business assets. As software qualifies as intellectual property, it is also an intangible asset whose value can be estimated through a valuation. This valuation is normally useful in the business development strategy of a company.

Why is Valuation for Software Important?

When you determine the value of your software, you can justify the purchase or sale of a software asset. Let’s say you were offered a deal to sell your software to a company, but you are not sure if the deal is good or not. Getting a valuation for your software can help you set the right price for it for you to gain a profit.

Get Software Valuation From Eqvista

At Eqvista, we give our clients an objective valuation report detailing the effort and cost criteria for a given software product. Our valuation team conducts the valuation for a software by using three methods: income approach, market approach, and asset approach:

• Income Approach – The income approach is normally used to value service-oriented and SaaS companies. In a software valuation, this approach measures the value of a software by reference to its future earnings, cash flows or cost savings.
• Market Approach – Under the market approach, a software’s value is determined by comparing transactions involving similar software packages. One challenge in using this approach is the scarcity of reasonably comparable transactions, especially if the software is an internal use software that has been customized for unique specifications.
• Asset Approach – The asset approach uses both the historical cost approach and cost-to-reproduce method, being the value of the software if it was recreated from the start.

Aside from the three valuation methods, we also have expert analysis on the technological, functional, adaptability and IP rights of the software. These are important value drivers that are assessed during the valuation:

• Technology – Assessing the innovation level, ease of modification and updating, replacement cost, and remaining useful life or obsolescence are some areas of technology that a valuation may cover. For example, is the software’s language up-to-date and easy to understand? Is the software less useful than a similar replacement? The valuation of software also considers the extent to which the intellectual property is legally protected.
• Richness of functionality – This driver looks into the ease of use of the software, whether it is maintainable, efficient and applicable to a wide range of platforms. It checks whether the software is compatible with the most recent version of other software.
• Adaptability – Softwares that can be easily scaled to handle bigger business structures, and can work together with other software applications with ease will inherently command higher valuations. Nowadays, more and more businesses are moving towards technology and softwares to help run their businesses efficiently and effectively.
• Documentation – The valuation analyst looks at the extent of the documentation, aimed at both the programmers and users. For example, is there enough user support, developer manuals, or help utility? Documentation is important as it will be the main source of information in using the software.

Software Valuation Report

Eqvista provides fully-customized valuation reports to clients with an overview on the process, graphs, and valuation methods used. Prepared by our team of NACVA certified valuation analysts, our valuation report sets an accurate fair market value (FMV) of your software.

Sample Valuation Report

For our reports, we include an overview of valuation showing the different methods used as presented below:

Asset Based (Cost to reproduce)

Why You Should Get a Valuation for Your Software

Getting a valuation for your software is important if you want to know how much your software is worth. By knowing its value, you can easily determine how much you can sell your software for (e.g. if you were approached by someone who is interested in purchasing your software). The valuation can also increase your chances of landing investors to back your project. Letting potential investors know how much your software is valued will make your product more attractive, thus, allowing you to receive more funding for your software’s future developments.

Price starts from $2,290

Eqvista’s software valuation starts at $2,290, which includes full customer service support from NACVA certified valuation analysts. The valuation is a seamless process, and is conducted in a professional and timely manner. Contact us now for more information.