Unfortunately, two stumbling blocks often make the Market approach unusable, or at best limit it to the elimination of extreme and unreasonable values. The first difficulty lies in deciding which deals are sufficiently similar. Factors worth considering may include the technology involved, prevailing economic conditions, relative strength of the parties, market size and demographics, barriers to market entry, software profitability and age in the product life cycle, and other terms of the agreement such as exclusivity, support, ownership of modifications, and so forth. Agreeing on the weight to give each factor can also be difficult. The second hurdle is obtaining the numbers and other details of similar deals.
Many agreements keep such details confidential.
Even if no information is found, the Market approach can be worthwhile because the search for similar transactions may be a joint effort in which the parties cooperate, and it may make both parties aware that a deal includes much more than dollars. The Revenue approach is probably the most widely accepted method. It assigns software the present value of expected future revenue from the software based on past performance in the market and some assumptions about the future. The expected future revenue is computed as the size of the expected income stream, times the expected duration of that stream, times the chance of actually collecting the income. Of course, the size of an income stream typically varies over time.