Jorge Mera (Product Manager, ProSight) interviews David Fein (Founder and CEO, ValuSource), a leader in valuation software for nearly 40 years. David’s journey includes building ValuSource, selling it, and then reacquiring it, all while maintaining a strong brand presence. They discuss the brand’s evolution, strategic positioning, and how innovation, including AI and partnerships, is shaping the industry’s future. This conversation offers valuable insights for entrepreneurs and valuation professionals alike.
Jorge: ValuSource has such a rich history, and your personal journey with the company is unique. You founded it back in 1986, then sold it, and later bought it back, which is rare. Can you take us through that journey and share some of the lessons you’ve picked up along the way?
David: We started ValuSource as a typical 1980s software startup in a San Diego apartment, programming and slowly growing for nearly ten years. Eventually, we partnered with Wiley, a global publishing company, and sold them the company in 1994. This partnership allowed ValuSource to grow significantly. However, after about ten years, we agreed it was best for ValuSource to operate independently, so we bought it back in 2004.
A key milestone in our growth was our early partnership with the National Association of Certified Valuators and Analysts (NACVA). This collaboration in software development has been incredibly beneficial over the years, providing strong support from the largest business valuation association.
Jorge: When you took the company back, how did you incorporate that journey into your revamped branding strategy? Has your approach to branding changed at all over the past few years, and how do you think about leading with your brand when you’re out in the market?
David: ValuSource has maintained a strong brand identity, even while operating as a sub-brand under Wiley. After reacquiring the company, we preserved the ValuSource brand. Our branding strategy focuses on clear positioning, informed by competitive analyses that address why potential customers should choose our product. This approach shapes all our communications, including our website, which features a persuasive positioning statement supported by a competitive matrix that highlights our strengths and areas for improvement. This strategic perspective drives our branding and market positioning efforts.
Jorge: And do you find that, as the years go by, you have to adapt and evolve that position statement, or does the brand, at its core, always remain the same, more or less?
David: The valuation industry is relatively small, with about 10,000 professionals. At ValuSource, celebrating our 40th year, we benefit from strong brand recognition, bolstered by our partnership with NACVA, which enhances our market presence through training and conferences. While our core mission remains consistent, we adapt to industry changes, including exploring AI integration in our operations and products. Our longevity in this niche market highlights the strength and stability of our brand despite technological shifts and competition.
Jorge: Absolutely. The ability to adapt and the perseverance to navigate changes is so important. Staying relevant and continuing to provide valuable services for forty years is quite rare in many industries.
We are currently experiencing a significant shift as RMA and BAI merge their partnership. Both organizations have built strong reputations over decades, nearly a century each. RMA has traditionally focused on serving the commercial banking and risk management sectors, while BAI has expertise in retail banking. By bringing these two together, we can create a more comprehensive offering for the market.
Now, as ProSight Financial Association, we have the opportunity to empower financial services leaders to strengthen, advance, and grow both the industry and their individual institutions.
David: That is an interesting combination. Very strategic. How do you see that affecting the Statement Studies? Will that remain the same product it’s always been, or do you see that evolving into something else?
Jorge: The Statement Studies database aims to enhance our offerings and create a more robust benchmarking tool for improved user experience. With access to new data sets, including BAI benchmarks for small business and individual banking deposits, we gain valuable organizational insights.
While we may not merge these products, we can leverage insights across the ProSight organization, such as integrating compliance data to enrich Statement Studies. Ultimately, the merger of BAI and RMA strengthens our offerings and increases the value we deliver to our users and their organizations.
David: I imagine there is an opportunity to share processes and technologies. Especially when it comes to the benchmarking products that you both produce.
Jorge: There are definitely opportunities for both groups to take a look at the ways they are putting data together for benchmarking products. Then, of course, there are opportunities to leverage new technologies. Very similar to how ValuSource grew and expanded after benefiting from partnerships with Wiley’s and NAVCA.
David: Right, it’s about leveraging the individual strengths to create something better. It becomes greater than the sum of its parts.
Jorge: Exactly. While I don’t foresee any drastic changes in the immediate future, there’s a new possibility of enhancing the offering with perhaps other insights, bringing in a compliance component to it, or leveraging new technologies to analyze the current statement and provide unique and interesting insights from our 20+ years’ worth of data. It’s a great opportunity to make the reports more robust and insightful.
David: You probably now have a wider list of banks that you’re a part of with the merger. Will more banks possibly provide statements to the Statement Studies?
Jorge: I think that’s the goal, bringing more institutions into the mix. While we share many of the same customers, we also serve distinct audiences. That’s why we’re actively engaging with our partners to identify mutual opportunities and areas for collaboration. As the integration with ProSight continues, there’s potential to bring in BAI members and customers to expand the reach and impact of Statement Studies.
David: That would be one huge benefit for the valuation community. Expanding the number of statements across more sections and codes. This broader coverage would provide more comprehensive data and insights for valuation professionals.
Jorge: Exactly. Speaking of that community. You once mentioned valuating is more of an art than a science. Can you elaborate on that thought a little? And maybe take us into the mindset of a valuator?
David: I think part of it is absolutely an art. Ultimately, valuation is about telling the story of a company, its past, its current state, and its future. You’re looking at the business itself, the industry it operates in, the geography, and other external and internal factors. It’s a complex process, and it’s a bit like creating a piece of art. I just returned from Italy, where I saw incredible artwork, and it struck me: valuators do something similar. We use data, methodologies, and professional judgment to “paint” a clear and supportable picture of value, right down to a specific number.
There’s also the scientific side of things. Valuation is guided by a range of professional standards set by organizations like NACVA, the AICPA, and USPAP. Recently, NACVA updated its standards to more explicitly require peer statement comparisons, something that had been suggested in the past but is now clearly defined. In response, we’re actively working on a campaign to help educate the valuation community about this change, including how to effectively conduct peer comparisons. The RMA data is great for this purpose, and we’re highlighting it as a valuable resource in that process. Many valuators already include peer comparisons in their work, but this formal update reinforces its importance and helps standardize best practices. It’s a recent shift, within the past six months, and we believe it’s a positive step forward for the profession.
Jorge: So that mix of art and science must require a creative mindset, beyond just studying reports. Can you elaborate a bit more on the thought process that goes into valuation?
David: Right. A valuator needs to think like a detective. You’re digging into financials, normalizing statements, and trying to understand not just where a company has been, but where it’s headed. Ultimately, you’re estimating ongoing cash flow and assessing risk. If a piece of data doesn’t relate to cash flow or risk, it probably doesn’t impact value. That mindset, curious, analytical, and forward-looking, is crucial.
Going back to the art analogy, a valuator paints a picture using numbers, assumptions, and methodology. Especially in litigation, you have to defend that picture to a judge or jury. It’s not enough to crunch numbers; you need to clearly communicate the story of the business: its history, its future, the industry context, even regional factors. You’re saying, “This company is worth X,” and you have to prove that with clarity and conviction.
Jorge: You mentioned cash flow and risk. Can you explain why they’re so critical in valuation?
David: They’re the core components of value. Risk, like in lending, is about uncertainty. What’s the likelihood this business performs as expected? Cash flow is the return the investor expects. Together, they drive nearly all valuation outcomes. If something doesn’t affect one of those, it’s not relevant to value.
And then common ratios like current ratio, leverage, and EBITDA are useful, but common-size statements are often more valuable. They allow comparisons across different-sized companies. Profitability, for example, is easier to evaluate when expressed as a percentage. That helps the valuator tell a clearer story.
Jorge: Speaking of statements, how does ValuSource enhance financial benchmarking data?
David: We have used standard benchmarking methods, such as the 25th, 50th, and 75th percentiles from RMA, which are common when looking at medians or averages. Typically, a green, yellow, or red-light approach is applied. When evaluators or those involved in benchmarking assess their position relative to the industry, they ask themselves whether they are above, below, or on par with the benchmarks. The challenge lies in interpreting these results. This statistical approach can be difficult to communicate clearly, especially when explaining it to a judge in the context of valuation litigation, which is the specialty of ValueSource.
Many years ago, we approached RMA with the idea of expanding its offerings to include valuation editions that cover the 10th to 90th percentiles. We developed built-in tools in our products to assist with ranking.
These tools allow valuators to more easily determine a company’s position within its industry. For instance, when benchmarking profitability, our tool would indicate the company’s percentile, such as the Nth percentile in profitability. This is far more intuitive than simply saying that the company is “slightly above average.”
Jorge: Why does percentile ranking matter so much to valuators?
David: Because it tells a clearer story. Everyone understands percentiles, like SAT scores. Saying “this company ranks in the 90th percentile” is easier to understand and more defensible in court than “it’s 0.2 above average.” Our tools even interpolate to provide a precise ranking. That’s what helps a valuator make their case convincingly.
Jorge: Shifting gears a bit, I’d love to get your perspective on technology, specifically AI, and its impact on the valuation space. How do you see AI driving efficiencies in the industry, and how is the valuation community beginning to adopt or adapt to these emerging technologies?
David: AI is becoming increasingly significant in the valuation space, with organizations like NACVA actively engaging in its integration. They’ve launched a webinar series on AI’s application in valuation and issued guidance emphasizing that while AI can assist with analysis, valuators must verify all outputs in their reports. Despite some hesitation in the industry, practical uses include report editing, trend analysis, and document summarization. Tools like OpenAI’s models are effective when properly configured. Overall, AI is a valuable support tool that enhances efficiency and perspective in valuation, but professional judgment remains irreplaceable.
Jorge: You’ve talked a lot about the opportunities with AI. Any thoughts on the associated risks, maybe the top ones the industry should focus on?
David: I believe the biggest risk with AI right now is learning to use it effectively. We are still in the ‘DOS 1.0’ phase of AI, which means there’s a steep learning curve. Many professionals are experimenting, but it often feels like trial and error.
I recently spoke with someone at a valuation firm developing a tool using a master prompt. This involves creating a comprehensive document that outlines the organization’s knowledge and strategy, which serves as a reference for an AI model.
Unlike traditional software, which is linear and transparent, AI is unpredictable. Even developers can’t fully explain how it generates outputs, leading to variations in responses to the same prompt, which introduces risk.
Another major risk is the rapid pace of AI evolution. Individuals and organizations are struggling to keep up with the demand for responsible and ethical use. It’s crucial to balance staying current without rushing into misuse while embracing innovation without falling behind.
Jorge: We could talk about AI for a while longer and discuss all those implications. But for our final question, to wrap things up, do you have any closing thoughts or advice for professionals in the business or valuation space? Are there specific areas you believe they should focus on or skills they should work to master as they navigate the future of the industry?
David: That’s a big question. First, invest time in understanding AI at a deeper level. Continuous learning and mastery are essential, as AI will have a significant and lasting impact. As Tony Robbins says, embrace “constant and never-ending improvement” in your approach to AI.
Second, look for ways technology can enhance your work. In the valuation space, it’s easy to get caught up in daily tasks without evaluating the bigger picture. Regularly assess your processes—not just to cut costs, but to achieve better outcomes. This mindset is valuable in every profession.
I was reminded of a podcast featuring Tim Ferriss, where he detailed his annual review. He reflected on his past year, identifying what worked and what didn’t, which was a thoughtful approach to self-reflection. We could all benefit from such introspection by evaluating our goals, outcomes, and personal well-being.
Jorge: That’s a great sentiment to end on. Thank you for taking the time today and for your continued support of ProSight Statement Studies.
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