Assessing Business Value in Adair
Do you know how much your Adair business is worth? Assessing the value of your Adair business can be more complicated than just working out the value of its assets. The value of a business means different things to different people, but there are some core principles of business valuation that can help you get the right valuation done for your Adair business. This seems like it could be overwhelming, but it shouldn’t be. Our experts at Redwood Valuation Partners have years of experience in business valuation and are eager to help you through the process from start to finish.
409A Valuation, IRC 409A Valuation, Purchase Price Allocation in Adair, OK
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Adair Business Valued?
There are a myriad of reasons to get your business valued, but perhaps the most obvious one is in order to see how much it will sell for. If you are considering selling your business, it’s critical to get a valuation first so that you can go into negotiations with potential buyers armed with knowledge and data.
In addition to how much a business is worth, a valuation can show which parts of a business are valuable. The value of any one business could come from entirely different sources than a different business. A local business that is important to the community in Adair may have a high value for that particular community, but not for a potential buyer. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. It comes down to the details.
It’s imperative, then, that your business valuation is handled by professionals. In addition to understanding your business, an accountant doing a valuation should know the ins and outs of finance, venture capital, tax law and other fields. If you are interested in stock compensation, expenses or selling price, you will see a lot of benefits from a well-done business valuation. However, any advantages of doing a valuation are up to you and your business. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
What Approaches Are There to Business Valuation?
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. There could be other approaches to business valuation, but the three described here encompass the most common methods. No matter where your business is located, these methods can help you find your business’s value. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.
Determining Value Based on Assets
There are several asset-based approaches possible for business valuation. The overall goal is to add together all the investments in the business. An accountant going forward with an asset-based mindset is theoretically attempting to imagine what it would cost to set up another, identical business. This reveals what that original business is worth (what kinds of assets it has) and what liabilities it has. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
It sounds straightforward, but there are hidden complexities. In practice, determining which assets and liabilities to include, and how, is a tricky process. A going concern asset-based approach or a liquidation asset-based approach will help you move forward with this appraisal.
A going concern asset-based approach is a little more straightforward. Value here is determined based on the value of the assets the accountant finds in the business contrasted with the cost of any liabilities. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. The net cash received from such a liquidation is the business’ value.
The type of asset-based approach you choose depends on your business. It is possible that a different method is more suitable for your particular business. For example, a sole proprietorship in which assets are in the name of the business’ owner are not good candidates for this approach. By contrast, corporations spread out the ownership of assets throughout the company and could benefit more greatly from a valuation based on assets.
Looking at the Market
It can be useful in a valuation to look at the bigger picture and see what a business is worth compared to the rest of the market. For example, you could compare your business to others located in Adair. The goal is to see what your business would be worth by comparing it to other similar businesses.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. An accountant using this approach will try to determine the fair market value of your business and what a buyer is likely to pay for it in the current climate.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
Looking at Income or Earnings
An income- or earning-based approach is different from the other two in that it is concerned with future potential. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
It is not an exact science to predict the future of a business and therefore an earning focused approach can invite an element of risk. There is, however, reliable data to back up the value assessment made through this method. One method to smooth the bumps in the road in this method is to “normalize” a business’s earnings so there are no remarkable costs or windfalls that could skew figures. Sometimes, these predictions are divided by capitalization factors that fluctuate based on the market.
There are, as with other methods, additional considerations here, such as the type of business you run. How customers view a business is a factor that is not captured in income figures or market values but that can impact a business’s value.
What Kinds of Valuations Exist?
The types of valuations possible go beyond those meant strictly for businesses trying to sell. There are other value assessments that serve difficult purposes. Someone with a patent, for example, may also seek a valuation of their property.
Getting a 409A Valuation
This type of valuation is concerned with the stocks connected to your business. Stocks are frequently given to employees and contractors as part of their earnings from working. Stocks given to employees are regarded by the IRS as deferred income ” income given to someone in one year but actually paid in a different year.
This sounds complicated. It simply means those stocks have to be accounted for. Businesses who need this form of valuation need it in order to determine the fair market value of their business. Any employee offered stock as part of their compensation must be able to buy equity in your company at or above the fair market value determined through this valuation. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.
It is important to know whether or not your business is legally required to get this form of valuation. Even if you have gotten a 409A valuation in the past for your business, the law could require that you get another one each year or every time a new round of funding closes.
It is advised that you don’t try to do a 409A valuation yourself, even though you can, and instead let an accountant deal with unforeseen difficulties that you aren’t prepared to handle. Experience and expertise are key benefits that only an accountant can offer if you have to work through a 409A valuation.
Business Valuations/Looking at Business Valuations
Some of the reasons for a business valuation include things such as entity discussions and business negotiations, but they are also useful while planning a business or estate. You may be hoping to see how much you could make by selling your company. Others desire a business valuation when researching things such as tax liability.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. As our clients have expanded, so has Redwood, increasing the size and expertise of our team. We years of experience and a comprehensive team, we are prepared to take on a host of business valuations needs. Whether you want to find your fair market value or do tax or financial reporting on your business, we are prepared to help you through the process.
IRS regulations, business needs and finance are complex fields that call for knowledge and specialization. You know your business, but evaluating your business against all applicable laws, regulations and financial considerations takes an expert in the field of business valuation.
IP and Patent Valuations
Patents and intellectual property also require their own valuations. Most businesses do have some sort of intangible property that want to protect and valuate, though. Taxes are complex when it comes to IP and patents, but it is also important to make sure trade secrets and trademarks can be protected. But you might also seek an IP and patent valuation in order to plan, secure a merger or acquisition, or during litigation.
Once you have a patent or intellectual property that has value, you need to make sure it is protected. Defining assets that are not necessarily tangible can be complex, though. But the value of IP and patents cannot be understated, especially in recent times when so much of a business’s value comes from these assets in particular.
Purchase Price Allocations (ASC 805)
You may be required to do a purchase price allocation. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. Of course, the overall goal is to figure out the purchase price for an acquisition.
A purchase price allocation ultimately comes down to determining what various parts of a purchased business are worth, including assets and liabilities. Sometimes a business is sold in pieces and in such cases it’s important to find the value of those pieces before any transaction takes place.
Getting a Business Valuation Done Right
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Whether you are comparing your business to others in Adair or looking elsewhere, a business valuation can show you the fair market value of your business and assets and keep you in compliance with any tax code regulations.
Often, you will need to know the fair market value of your business. Whether you are looking to assess your value for the sake of selling or have yearly tax considerations, a business valuation will help. Intellectual property can be assessed and protected through a business valuation. The intricacies can seem overwhelming. A helping hand through the process of business valuation can make the process easier. Whether it’s finance, tax issues or business, our accountants are prepared to navigate the technicalities with you.
While venture capital and auditing can be complicated, we believe teamwork and expertise can help manage the process of a valuation. At Redwood, we have built a team grounded in years of expertise and business knowledge. We know the pressures and stress of running a successful business. We value your time; let us minimize the burden of complicated valuation details while you focus on what you know best ” your business.
Whatever your reason for getting a business valuation, we can offer client focus, experience and expertise that can make the process as easy as possible for you. Along with the obvious, our valuations include customized reports, audit defense and free consultations. We can assist you from the very beginning if you don’t know where to start. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. See both subjective and objective elements of your valuation with an in-depth look at your business. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
The bottom line is that a business valuation, for any reason, is best approached with help. Redwood has the experts on hand to make your business valuation a painless process with lots of benefits. A free consultation may be the perfect starting point.
Our clients have direct access to Redwood’s managing partners and directors. You know your business better than anyone, and the valuation process includes subjective assessments that require your input. We guide you through this process, save your time, and allow you to focus on what matters – growing your business. Get a quality company appraisal in Adair, OK.
The Redwood team has performed many IRC 409A Valuation Seattle engagements, and we offer a wide variety of business appraisals to Seattle. Other services include ASC 805 valuation (purchase price allocations), IP valuation, patent valuation, impairment valuation, carried interest valuation, portfolio valuations, IRC 382 valuations, and many other types of stock valuations and business valuations.
With over 50 years of combined valuation experience, we provide top-tier expertise and client service at a reasonable price. Our experience as CFOs and Controllers of venture firms and startups separates us from our competitors who lack the boots-on-the-ground experience that our clients have, which we also share.
If you plan to issue stock options in the next twelve months or have any questions about potential valuations, give us a call for a free consultation and we will give you candid advice about whether a valuation may be needed and how we might help. Our goal is to help our clients achieve their desired goals with minimal burden.
409A Valuation Adair
Redwood Valuation Partners was formed behind an idea of service positioning us as one of the most well respected companies in the industry. Our expert knowledge of finance, tax, venture capital and the audit process helps us understand the difficulties of start-ups. We speak your language! Give us a call and learn how we can help. For information on Business Valuations follow us on Twitter Like us on Facebook and find us on Google+ too! (206) 660-1295