Valuing technology and data when you buy or sell a business

We are often asked to value a computer system when a business using our software is put on the market. We point to the book value as being the most appropriate for the hardware and the current purchase price as being appropriate for the software if it is up to date and supported. These are starting points. The reality is that the price probably needs to be lower, especially if the system has been badly used. Garbage data has no value. This is one reason why small business owners need to treat data as an asset – so it has a good resale value when they do sell their business.

Due diligence ought to uncover data problems and should lead to negotiating down the goodwill component of the purchase price. It is important that the sale contract is explicit in terms of business data. We have seen situations where data history is wiped on the day of settlement meaning that the business has no history on which to base purchase decisions.

It all comes back to good data management. Time spent today adds value to the business when it’s put on the market and ensures an easier hand over.

Category: Small business

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