How to Find the Value of Your Ash Fork, Arizona Business
Have you ever assessed the value of your Ash Fork business? Assessing the value of your Ash Fork business can be more complicated than just working out the value of its assets. The value of a business might change depending on who you ask, but luckily there are certain consistent principles applied to any business valuation that is performed. If this sounds technical, don’t worry. 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 in Ash Fork, AZ 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
A business valuation could be conducted for several reasons, but often it is done because a business’s owner wants to know how much the company is worth. 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 can also help show you where your business’ value comes from. Teasing out all the reasons a business is valuable is complicated, though. A business that is important for a particular city, such as Ash Fork, may have high value there, but not elsewhere. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. The particulars of a business will determine the outcome.
Therefore, getting experienced accountants to do a valuation is critical. Getting your business valued requires knowledge of finance, tax law, venture capital and the audit process, as well as of your business. But the benefits of a business valuation come in many forms, from stock compensation to expenses to selling prices. Ultimately, the reason for a business valuation depends on your particular circumstances. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
Approaches to Business Valuation
When assessing the value of any business, there are three broad approaches that are considered standard. While there may be other approaches, these three encompass the main methods of assessing a business’ value. 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. In this approach, a business’s investments are added up to determine value. One way to go about looking at a business’s assets is by figuring out how much it would cost to set up a brand new business that mimics the existing one. This exercise can reveal a lot of information about a business, including its liabilities and assets. 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. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. A going concern asset-based approach or a liquidation asset-based approach will help you move forward with this appraisal.
One method is to look at assets with a going concern. Simply put, the accountant can subtract the value of any liabilities from the assets that the business has. In the other approach, a liquidation asset-based approach, the accountant first imagines that all the assets and liabilities were paid off, as though the business was liquidated. After a real liquidation, the business would receive cash; this now becomes the business’s value in a valuation.
The specifics of your business may reveal whether this sort of approach is right for you. There are other approaches if focusing on assets is not right for your situation and goals. There are certainly some businesses, such as those that are in a sole proprietorship, that would be well-advised to take a different approach. A corporation, in which all assets are owned by the company as a whole, is a much better candidate for an asset-based approach.
Determining Value Based on the Market
A market-based approach looks at the market as a whole and not solely at your business. For example, you could compare your business to others located in Ash Fork. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
The advantage to this approach is that it looks more comprehensively at the overall business climate for your particular field. 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.
This approach encounters difficulties in that often other businesses are not eager to share their worth with competitors. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
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. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
Of course, assessing value this way comes along with the risk of assumptions and predictions that invite uncertainty. However, they can use hard data to back up this prediction. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. 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. Sole proprietorship could mean that a business’s identity is so closely linked to its owner that selling it incurs particular risks that can not be predicted based on earnings alone.
Types of Valuations
The types of valuations possible go beyond those meant strictly for businesses trying to sell. Business valuations are just one type of valuation that is possible. Others focus on things such as patents and intellectual property.
What is a 409A Valuation?
A 409A valuation looks at stock as it relates to the value of your business. It is common for employees in many fields to receive stocks as compensation. Such businesses need a 409A valuation because that stock is considered a form of income offered in one year but paid out in a different year.
This may seem overwhelming. What it comes down to is stock options. For one thing, this type of valuation can help a business find its fair market value. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.
Sometimes it is a matter of compliance with the law to get a 409A valuation for your business. 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. A Redwood valuator will know the ins and outs of this type of valuation, as well as the best approach for you and your business as you undergo this process.
Valuations for Businesses
Whether you’re negotiating a transaction, planning your business or estate, or involved in entity conversations, business valuations cover a wide range of situations and companies. You may be hoping to see how much you could make by selling your company. Figuring out your tax liability is another common reason for seeking out a business valuation.
Equity and enterprise valuations are best handled by a talented accountant. At Redwood, we’ve seen our clients’ needs expand as our own business has expanded. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. Business valuation could include tax or financial reporting, assessment of fair market value or for purchase price allocations.
The intimate details of IRS regulations, business and finance can be a complex maze to try to sort through. A valuation is an added complexity on top of keeping your business running, so allow our accountants to handle valuations for you.
Valuations for IP and Patents
Finding the value of intellectual property and patents is a specialized field. Most businesses do have some sort of intangible property that want to protect and valuate, though. IP and patents are always under threat from competing trademarks and leaked trade secrets, as well as tax concerns. But you might also seek an IP and patent valuation in order to plan, secure a merger or acquisition, or during litigation.
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. Yet for many businesses, understanding those assets and their precise worth can add value and keep the company in compliance with all applicable laws.
Assessing Purchase Price Allocations for Business
Purchase price allocations, or ASC 805, may be necessary for your business. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. 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. In a transaction, a lot of smaller pieces of a company can be traded and purchased and it’s important to understand the value of all of these.
The Last Word on Business Valuations
At Redwood Valuation Partners, we are experts in business valuation. Whether your business is in Ash Fork 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.
Fair market value is a crucial piece of information you should have about your business. This may be because you intend to sell your company or because you want to stay in compliance with 409A. You also could seek a business valuation in order to protect a patent. Assets and liabilities are complicated. That’s where experienced accountants come in to help inform and guide you. Our team has worked for years in business, finance and tax issues, allowing us to meet the needs of a wide range of businesses.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. Our team consists of experts who have worked in their specialties for years. Many of the people we work with come from high-pressure environments with tough deadlines. We let you get to the important work of running your business while we take care of the intricacies of business valuation.
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. If you aren’t sure where to start, we can guide you through the process right from the start. And our customized reports will include all the detail you need to make business decisions based on your valuation. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
If you do want to find the value of your business or assets, having skilled assistance can be a boon. Get Redwood’s experienced team to assist you as you work through a business valuation for any reason. 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 Ash Fork, AZ.
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 Ash Fork
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