At the Kogod School of Business, students learn how AI is transforming business valuation and driving better decision-making.
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Jamie McCrary
Artificial intelligence is transforming how businesses approach valuation, making the process faster, more accurate, and data-driven. From automating financial analysis to evaluating market trends, AI-powered tools are optimizing the business valuation process. This article breaks down key valuation methods and shares how leaders are leveraging AI to optimize business outcomes.
Simply put, business valuation is the process of determining the economic value of a company. It involves evaluating each financial aspect of a business, including its assets, liabilities, cash flow, and earnings.
Business owners typically undergo a valuation process when:
Depending on a company’s size, industry, and goals, it can be valued in numerous ways. Several standard methods include:
Business valuation is critical for investment and sales purposes. By knowing the value of their company, owners can provide an accurate estimate of worth to potential buyers and negotiate with greater authority.
It also helps owners gain a significant edge on their competition: 98 percent of small business owners don’t know their firm’s value, according to a recent survey by M&T Bank.
This not only hinders potential sales but also limits the owner’s longer-term strategic planning. Valuation also helps empower owners to take action to increase their business’s value, chart estate and tax plans, and create succession plans.
Artificial intelligence enables business appraisers to enhance the accuracy, speed, and relevancy of their valuations. It uses advanced algorithms and machine learning to:
It also helps mitigate human limitations, such as bias and calculation errors. AI-powered tools eliminate factors such as opinions and emotions that can distort the valuation process, thereby eliminating the possibility of human error.
The next generation of finance leaders won't just be building models; they'll be using AI to guide multi-billion-dollar decisions. AI handles the heavy lifting of analyzing market trends and extracting data-driven insights at scale, far beyond what traditional spreadsheets can do."
Angela Virtu
IAAI Associate Director and Professor of Information Technology and Analytics, Kogod School of Business
AI-powered tools help optimize the valuation processes in several key ways. Here are three of the most useful and common.
Automate data collection and analysis. AI can extract and process vast amounts of financial data in a fraction of the time that humans can, and with much greater accuracy. Examples might include using AI to analyze:
Track patterns in market and industry trends. It can also help business owners and investors make strategic decisions by tracking different trends and providing key updates in real-time. This might include following macroeconomic conditions, shifts in customer preferences, or important tech advancements.
Inform longer-term strategic plans. After reviewing the valuation, AI can help business leaders chart longer-term plans, including estate, tax, and succession planning. Leaders can also use the added capacity AI affords for strategic thinking and planning.
AI valuation platforms are versatile but vary in features and capabilities depending on industry. For a snapshot of tools and how they work, here are five of the most popular:
As AI continues to evolve, its role in business valuation will only become more integral. By understanding and leveraging these tools, future business leaders can make more informed, strategic decisions in an increasingly data-driven world. Armed with cutting-edge knowledge and hands-on experience in AI and sustainability, Kogod students are uniquely prepared to lead the next generation of businesses toward smarter, more responsible, and more profitable futures.
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