By: Monica Stevens

Have you ever wondered what truly drives the worth of your software company in the eyes of investors? With the tech world continuously evolving, determining the intrinsic value of a software company can be as puzzling as solving a Rubik’s Cube blindfolded. Brad Weekes from Software Equity Group (SEG) sheds some light on the subject. 

Brad has spent nearly three decades in the deep trenches of tech M&A, making him nothing short of an oracle when it comes to software company valuation. With its robust 30-year methodology, SEG has become the North Star for software CEOs seeking to amplify their company’s value with an eye toward a profitable exit strategy. But what makes their approach so innovative? It turns out it’s all about honing in on 20 critical factors.

According to Brad, tracking these factors isn’t just shrewd; it’s essential. “You wouldn’t drive a car without a dashboard, right? Well, understanding these factors is like having a dashboard for your company’s worth,” he explains. And like any good dashboard, it gives you insight into what’s working and what’s not, highlighting areas where strategic adjustments can lead to significant value increases.

So, what’s on this checklist of valuation gold? While the complete list comprises both qualitative and quantitative factors, there are key highlights that buyers and investors often prioritize. Consider factors like Gross Revenue Retention, Rule of 40, EBITDA Margin, and Product fit. Beyond these, elements such as a scalable business model, a robust and diverse customer base, and innovative technology also play pivotal roles. However, it’s crucial to remember that these metrics offer a snapshot rather than the whole picture. Brad and his team at SEG understand this well, leveraging their expertise to ensure clients maximize their company’s value by addressing numeric insights and broader qualitative strengths and weaknesses.

One of SEG’s former clients, Steve Heinze, Founder & CEO of EnergyCAP, had some sage words for his younger self: “Engage with SEG right now! Take a break from growing the business and focus for a while on growing the value.”

Brad suggests CEOs should start preparing for an exit long before they ever plan to sell or seek investment. Minor tweaks in product, pricing, or markets today can result in a windfall down the line. True to its client-centric nature, SEG is about more than just numbers on a spreadsheet; it’s about nurturing relationships and understanding the heart and soul of a business. It’s this nuanced approach that has positioned them as perfect capital advisors — deeply experienced, with a spectacular track record and a team of super-committed professionals.

For those eager to dive deeper into this valuation enigma, SEG does not leave you wanting. They have a wealth of resources, including an eBook and a webinar that unwraps the layers of complexity surrounding this topic. A visit to their website is like finding the treasure map to El Dorado for software company CEOs who are serious about understanding and enhancing their company’s worth.

As exciting as this is, Brad cautions that it’s only a piece of a larger puzzle. “Our methodology is comprehensive, but it’s always customized,” he notes. “Every software company has its unique value drivers and challenges, and understanding these intimately allows SEG to pinpoint true market value accurately.”

Brad and the team at Software Equity Group can be found championing the cause of maximizing software company valuations via LinkedIn, where they eagerly engage with software leaders and foster community dialogue around this pivotal topic. Browsing through their LinkedIn page is a goldmine of actionable advice and insights, strategically positioning your company for a successful exit or just success.

As the adage goes, knowledge is power. And in the realm of harnessing a software company’s latent value, advice from experts like Brad Weekes is nothing short of priceless. So, whether you’re planning an imminent exit or just starting, a conversation with SEG could be a valuable investment in your company’s future.