Few issues generate more spirited conversation among valuation practitioners than the debate over whether to use Excel or a valuation software package. After all, many practitioners have invested hundreds, or thousands, of hours developing their own spreadsheets, templates, linked databases, and report-writing systems. Those systems may have served them well for years.
The question isn’t whether Excel works — the question is whether it’s the best platform to run a modern valuation practice. While time savings are often the most visible benefit of valuation software, they’re only part of the story.
Your decision today isn’t a simple build-versus-buy issue. It’s how to combine specialized business valuation software with requisite integrated databases and supervised artificial intelligence (AI) tools for your and your clients’ benefit.
Every valuation report enhancement, shortcut, undocumented formula, or workaround adds technical debt to a spreadsheet system. Inevitably, maintaining the system consumes more resources than replacing it.
The right software can improve quality and consistency by:
I first addressed the valuation software debate more than a decade ago. Since then, both valuation practice and technology have changed dramatically. Cloud computing has become routine. Data sources have expanded. Workflow automation is commonplace. Artificial intelligence has entered the conversation. Yet one reality has not changed: Both new and experienced valuation professionals can materially improve their valuation workflow by moving beyond Excel-only spreadsheets to valuation software.
A survey of non-users uncovered some of the primary reasons for valuators’ resistance to making the transition, including:
These valid concerns can be adequately addressed for most valuators with the right software package and proper training. For the majority of practitioners, thegains make a well-designed software package the better long-term choice. Valuation software might not be the right fit for every valuation practice, but I encourage every valuation practice to investigate before jumping to that conclusion.
Below we’ll explore some of the most common questions valuators may ponder when contemplating a switch from Excel worksheets to a software package. It’s important to note that valuator expertise and judgment remain the foundation of a credible valuation. No technology can replace those, but the right technology can significantly enhance valuators’ capabilities by allowing them to spend more time analyzing and less time building and maintaining tools.
My own transition mirrors many technological evolutions that practitioners have experienced over the years. I originally completed tax returns manually. Eventually we mailed forms to processing centers. Then came minicomputers, desktop software, networked systems, cloud computing, and automated workflows.
The tax profession ultimately accepted software because practitioners realized they weren’t being paid to complete tax forms. They were being paid to provide tax expertise. Valuation practice is no different.
More than 25 years ago, I began evaluating valuation software packages. Some were promising but needed work. Others were disasters. Over time, I experimented with numerous systems and worked with various vendors. I participated in beta testing and observed how practitioners actually used the products.
What became apparent was that the software itself was not the primary benefit. The primary benefit was the ability to redirect time and energy away from software construction and toward valuation analysis.
Over the years, practitioners considering a conversion from Excel-based models to valuation software have repeatedly asked similar questions. Let’s address the most frequently encountered.
Am I in the valuation business or the software business?
Most practitioners would immediately answer, “The valuation business,” even though many spend a surprising amount of time functioning as software developers.
A sole practitioner once told me that his family limited partnership valuation model consisted of approximately 125 interconnected Excel worksheets. He was understandably proud of the model. But I wondered how many billable hours had been invested creating, updating, and maintaining those worksheets.
Every hour spent tweaking and updating worksheets is an hour not spent generating revenue through professional analysis. Valuation clients hire us for judgment — not worksheet engineering.
How do I know the software calculations are correct?
How do you know your spreadsheets are correct? Spreadsheet error research has remained remarkably consistent for decades. Numerous studies have demonstrated that spreadsheet errors aren’t infrequent. In fact, some studies suggest that the overwhelming majority of business spreadsheets contain errors of some kind. For example, a 2024 study published in Frontiers of Computer Science found that, over a 35.5-year period (from January 1987 to June 2022), about 94% of spreadsheets in use contained “faults.”
That shouldn’t surprise anyone familiar with software development. Spreadsheets are software. The difference is that professional software packages generally undergo structured development, as well as extensive and continuing testing, validation, and updating. Moreover, when the provider believes its package is near completion, it releases beta versions to practitioners who further vet the software or updates before release to the wider market. After beta testing and any necessary refinement, the package is released to thousands of users who constantly push its limits and scrutinize its output. Most self-created spreadsheets don’t go through such processes.
Even highly skilled practitioners who carefully review their work face a challenge — every refinement to a worksheet creates the possibility of introducing new errors. Unfortunately, those errors often emerge during the worst possible times, such as in deposition or at trial.
Can valuation software accommodate multiple databases?
Modern valuation software can integrate data from numerous sources, including:
A spreadsheet may successfully import information, too, but software packages can set themselves apart by efficiently converting data into analysis. A robust valuation platform helps organize, document, test, and apply data information consistently within the valuation framework.
What about quality control and defensibility?
A valuation conclusion must be reproducible. Well-designed software packages often improve:
Those benefits may be more valuable than the time savings alone.
What is the cost-benefit of a valuation package?
Many practitioners focus on software cost while ignoring opportunity cost. Suppose a package costs $3,000 annually. At a billing rate of $350 per hour, that investment represents fewer than nine hours of billable time.
One weekly hour of spreadsheet maintenance represents about 48 annual hours of non-billable time, or about $17,000.
In contrast, how many hours are spent annually maintaining spreadsheets and updating reports? For most practitioners, the answer exceeds the software investment many times over.
Perhaps the most overlooked cost of sticking with spreadsheets is the succession risk. When a firm’s valuation process depends heavily upon one individual’s spreadsheets, formulas, and undocumented procedures, continuity becomes difficult. A structured valuation platform helps institutionalize the process and reduces dependence on any single practitioner.
How does AI affect the conversion decision?
AI doesn’t eliminate the need for valuation software, nor does valuation software eliminate the usefulness of AI. That’s because the two technologies serve very different purposes. AI helps the valuator explore possibilities; a valuation package helps the valuator execute. The two aren’t competitors but complementary tools.
Many practitioners already use ChatGPT, Gemini, Claude, and similar tools. AI can assist with:
More importantly, AI can identify inconsistent assumptions, compare draft (and opposition) reports, validate calculations, generate deposition questions, produce trial-ready findings, and so on.
I routinely use ChatGPT in my own work. Like any tool, however, its usefulness depends heavily upon the user’s expertise, both with the subject area and the tool itself. (Note: AI can “hallucinate” and generate persuasive but incorrect results. Consequently, all AI output must be independently verified.)
As forensic accountants have learned through decades of investigative work, data/information isn’t reliable evidence until it has been verified. AI-generated content should be treated similarly — as a lead to investigate, not a conclusion to accept.
Consider a practical example: Suppose a valuator downloads privately held transaction data from BizComps relating to HVAC contractors. The valuation package:
Now assume 20 BizComps transactions are identified, and one transaction reflects a multiple substantially higher than the remaining observations. The valuation package identifies the outlier, and the valuator investigates it.
AI can assist by proposing possible explanations, including:
AI may help develop additional research questions and identify information sources. It can prove valuable in summarizing industry trends and suggesting issues warranting further investigation, too.
However, AI can’t determine whether the transaction should ultimately be included or excluded from the valuation analysis. That remains a matter of professional expertise and judgment based upon verified evidence and the specific facts and circumstances of the engagement.
Technological advances have given valuation professionals the opportunity to leverage a workflow that’s more efficient than ever:
Valuation Package → Identifies and quantifies the pattern
Artificial Intelligence → Explores possible explanations and alternatives
Valuation Professional → Reaches and defends the conclusion
Every valuation professional I know wants to produce the highest quality work possible. The right valuation software package allows practitioners to devote more time to their core competencies and less time building and maintaining spreadsheets and copying data and charts into their reports. The strongest valuation practices will likely be those that successfully combine professional expertise, structured valuation software, and integrated databases with carefully supervised AI assistance.
The goal is to free practitioners from lower-value tasks. That was true when I first wrote about this subject more than a decade ago, and it remains true today. For most practitioners, the conclusion that valuation software is critical to achieving that goal is becoming increasingly difficult to ignore.
Author note: I didn’t identify the valuation software package that I have relied upon for many years because this content is instructive, not promotional. However, you can contact me directly regarding that and related valuation information at DarrellD@FinancialForensics.com.
