How are Aiea, HI Businesses Valued?
Have you ever wondered how much your business is actually worth? There are a number of intricate details that you have to evaluate in order to find your business’ fair market value. 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 Aiea business. This seems like it could be overwhelming, but it shouldn’t be. The accountants and valuators at Redwood Valuation have the expertise and knowledge necessary to make a business valuation a smooth and seamless process for you.
409A Valuation in Aiea, HI plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Top Reasons to Seek a Business Valuation
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.
A business valuation shows not just overall worth, but also where that value originates from. There are as many factors involved in the value of a business as there are businesses themselves. It might be surprising to learn that a business with a very high value in Aiea is perhaps not as highly valued in a different city. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. It comes down to the details.
That’s why expertise is crucial in a business valuation. 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. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.
What Approaches Are There to Business Valuation?
There are three main approaches to business valuation that an accountant or business valuator will use. There could be other approaches to business valuation, but the three described here encompass the most common methods. These approaches to business valuation are applicable whether your business is located in Aiea or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
There are several asset-based approaches possible for business valuation. In this approach, a business’s investments are added up to determine value. 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.
Of course, this approach is deceptively simple. This process gains complexity when the accountant has to decide which assets to include. Additionally, there are two different ways of going about this process: a going concern asset-based approach and a liquidation asset-based approach.
One method is to look at assets with a going concern. 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. After liquidation, the accountant can see clearly the value of the business.
The specifics of your business may reveal whether this sort of approach is right for you. Asset-based approaches are not appropriate for all business. There are certainly some businesses, such as those that are in a sole proprietorship, that would be well-advised to take a different approach. By contrast, corporations spread out the ownership of assets throughout the company and could benefit more greatly from a valuation based on assets.
Determining Value Based on the Market
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. For example, you could compare your business to others located in Aiea. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. In this approach, it is also very important to consider what a buyer in the market would currently pay for your business and what the fair market value would be.
This approach encounters difficulties in that often other businesses are not eager to share their worth with competitors. Some of the difficulty with a market focused approach arises when you encounter non-competition clauses and other information a business has decided to make private.
Making a Valuation Based on Income or Earnings
An income- or earning-based approach is different from the other two in that it is concerned with future potential. By looking at the income of the business in the present day, it is possible to make a strong prediction about future value.
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. Some of this uncertainty is offset by the ability to use concrete data to calculate this valuation. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. Additionally, capitalization factors may indicate abnormalities in the market itself that should be considered during a valuation.
How a business is run and who owns it is an important consideration here, as with other approaches to valuation. If a business is strongly linked with its owner and that owner sells or leaves the business, an evaluation based on past performance could lose its validity depending on how customers react to the change.
Different Kinds of Business Valuations
Not all valuations are the same and not all valuations are confined strictly to businesses. A business valuation is not the only type of assessment that is possible. Someone with a patent, for example, may also seek a valuation of their property.
Getting a 409A Valuation
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. Many businesses offer stock to their employees and contractors. When compensation comes in the form of stocks like this it is considered a special type of deferred payment that has to be reported.
It’s not as confusing as it seems. What it comes down to is stock options. Businesses who need this form of valuation need it in order to determine the fair market value of their business. Fair market value is especially important here because employees with stock need to be able to sell it at or above that mark. 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. Additional 409A valuations could be required at the end of a new round of funding or once a year, even if you have gotten this type of valuation in the past already.
While you can do a 409A valuation yourself, a skilled accountant can guide you through the process with expertise to make sure you don’t hit any bumps along the way. They can also help you choose the best approach to this valuation for your circumstances and business needs.
Valuations for Businesses
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. Maybe you are wondering how much your business can sell for right now. 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. At Redwood, we’ve seen our clients’ needs expand as our own business has expanded. We have experienced accountants prepared for whatever your business’ specific valuation needs entail. Perhaps you want to ensure compliance with tax reporting or, conversely, find the fair market value of your business.
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.
Valuations for IP and Patents
Intellectual property and patents have separate valuation concerns. However, this type of valuation can impact a wide range of businesses. 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. Litigation, mergers, acquisitions and business planning provide additional cause for an IP and patent valuation.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. 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.
Assessing Purchase Price Allocations for Business
You may be required to do a purchase price allocation. This requirement relates to the acquisition of businesses and includes determining the fair market value of the transaction consideration, intangible assets, liabilities and certain tangible assets as of the date of acquisition. Of course, the overall goal is to figure out the purchase price for an acquisition.
The goal of a purchase price allocation is to tease apart the pieces of a business, such as liabilities and assets, to find its fair market value. 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.
The Last Word on Business Valuations
At Redwood Valuation Partners, we are experts in business valuation. Whether your business is in Aiea or somewhere else entirely, we can help you find the value of your business or intellectual property and stay in compliance with the tax code and other laws and regulations.
Often, you will need to know the fair market value of your business. This may be because you intend to sell your company or because you want to stay in compliance with 409A. Intellectual property can be assessed and protected through a business valuation. Don’t get overwhelmed by the details. Get experts on your side who know how to cut through the complicated legal language to get you the information you need. 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. Our team consists of experts who have worked in their specialties for years. 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.
Whether you want a valuation for selling, taxes or any other reason, we can promise client focus and years of experience when working alongside you. Along with audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. 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. The comprehensive valuation report will include subjective and objective factors relevant to your particular business. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
In the end, if you need a business valuation, you will likely need help with that valuation. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. Begin your process with a free consultation.
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 Aiea, HI.
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 Aiea
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