Assessing Business Value in Ballwin
Do you know how much your Ballwin business is worth? Assessing the value of your Ballwin business can be more complicated than just working out the value of its assets. While the precise “value” of a business is a somewhat nebulous concept, there are consistent methods of assessment that can set you on the right track if you’re trying to find the value of your business. This might seem complicated, but we can help. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.
409a Business Valuation Services in Ballwin
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Why Do Businesses Get Valuations?
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 shows not just overall worth, but also where that value originates from. Teasing out all the reasons a business is valuable is complicated, though. It might be surprising to learn that a business with a very high value in Ballwin is perhaps not as highly valued in a different city. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. It all depends on your perspective.
It’s imperative, then, that your business valuation is handled by professionals. 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. But the reasons and advantages of a valuation are different for every circumstance. 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. These methods apply to an array of businesses, whether they’re in Ballwin or elsewhere. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Determining Value Based on Assets
Finding the value of a business based on its assets isn’t as straightforward as it sounds. 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 exercise can reveal a lot of information about a business, including its liabilities and assets. The next step involves balancing the assets and liabilities in order to calculate how much value the business holds.
Of course, this approach is deceptively simple. This process gains complexity when the accountant has to decide which assets to include. 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. The accountant looks at the company’s net balance sheet to find the value of its assets and then deducts the value of its 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 specifics of your business may reveal whether this sort of approach is right for you. Asset-based approaches are not appropriate for all business. For example, a sole proprietorship in which assets are in the name of the business’ owner are not good candidates for this approach. A corporation, however, could find value in an assessment that is asset-based, as its assets are owned by the entire company and not one person.
Determining Value Based on the Market
A market-based approach looks at the market as a whole and not solely at your business. The value of other businesses in Ballwin could provide insight on your own. 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. Some important considerations for this approach include the current fair market value of similar businesses and what price buyers are paying right now for businesses like yours.
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.
Income- or Earning-Based Approach
The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. By looking at the income of the business in the present day, it is possible to make a strong prediction about future value.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. However, they can use hard data to back up this prediction. 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. 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.
What Kinds of Valuations Exist?
Not all valuations are the same and not all valuations are confined strictly to businesses. There are other value assessments that serve difficult purposes. Someone with a patent, for example, may also seek a valuation of their property.
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. Stocks are frequently given to employees and contractors as part of their earnings from working. 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. It simply means those stocks have to be accounted for. A benefit of this form of business valuation is that it can determine a company’s 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.
Often, you will know you need this type of valuation because it will be legally required of your business. And if you’ve already gotten a 409A valuation, ensure you are getting re-evaluated once a year and/or any time your company closes a new funding round, in accordance with the law.
An accountant such as the ones at Redwood can be a crucial ally in trying to sort through the 409A valuation process any time you find you need to do one. 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. Or you might be hoping to assess your tax liability by looking at your business’ value.
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. 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.
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.
How to Assess IP and Patents
Finding the value of intellectual property and patents is a specialized field. Patent and IP valuations come from many different industries in the business world. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. Other reasons for IP and patent valuations include business planning, mergers and acquisitions and litigation support.
Make sure your patent or intellectual property is protected by understanding what it’s worth on the market. It is sometimes complicated to find the value of these intangible assets. 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)
Purchase price allocations, or ASC 805, may be necessary for your business. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. Purchase price is the crucial outcome of such an evaluation of a business.
This type of business valuation looks at all the different parts of a business to determine its 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. Ensure that your Ballwin business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Fair market value is a crucial piece of information you should have about 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. You also could seek a business valuation in order to protect a patent. 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. 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 valuation associates and analysts have worked in their field for years, becoming respected experts. We know the pressures and stress of running a successful business. That’s why we won’t waste your time; we’ll handle the details while you keep running your business.
Our principles when working with clients include intense focus, long experience and grounded expertise, no matter the cause for the valuation. 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. Take a deeper look at your business with the customized report we provide as part of our valuations. See both subjective and objective elements of your valuation with an in-depth look at your 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.
The bottom line is that a business valuation, for any reason, is best approached with help. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. 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 Ballwin, MO.
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 Ballwin
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