How are Binghamton, NY Businesses Valued?
Have you ever assessed the value of your Binghamton business? Finding that number can be a difficult process involving a whole slew of factors, from where you’re located to what “value” means to you. 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 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 Business Valuation Services in Binghamton
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Why Get Your Binghamton 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. 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 Binghamton 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 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. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
Approaches to Business Valuation
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. 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 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. The business valuator tries to determine with this method what it would cost to set up anther business exactly like the one that already exists. Assets and liabilities are much easier to see through this theoretical new business. The next step involves balancing the assets and liabilities in order to calculate how much value the business holds.
It sounds straightforward, but there are hidden complexities. 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. 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.
Choosing an asset focused method of business valuation maybe right for your business. Asset-based approaches are not appropriate for all business. As one example, a business that is owned in the name of a single person ” a sole proprietorship ” should be advised not to take this 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.
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 Binghamton. Viewing your business side-by-side with other, similar ventures can provide crucial information for figuring out the value of a business.
An approach that is concerned with the market as a whole takes a much more detailed view of factors outside of just the details of your business’s finances. 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. Non-competition clauses and private information can hinder this approach, making it difficult or potentially even impossible to get the information necessary for this type of valuation.
Looking at Income or Earnings
This approach to business valuation looks at potential and future value in order to draw conclusions. 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. Additionally, capitalization factors may indicate abnormalities in the market itself that should be considered during a valuation.
There are, as with other methods, additional considerations here, such as the type of business you run. 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
A valuation has benefits beyond just figuring out what a business is worth and there is therefore a lot of variety in types of valuations. Business valuations are just one type of valuation that is possible. A different reason for a valuation could include something such as intellectual property.
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.
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. 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. 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. 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. 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. As our clients have expanded, so has Redwood, increasing the size and expertise of our team. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. 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. 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. Most businesses do have some sort of intangible property that want to protect and valuate, though. 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.
Once you have a patent or intellectual property that has value, you need to make sure it is protected. These assets can be difficult to appraise as they are often intangible and difficult to define. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
What is a Purchase Price Allocation?
Purchase price allocations, or ASC 805, may be necessary for your business. 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. It is not always the case that a business is sold as one whole entity; it may be sold in smaller pieces.
The Last Word on Business Valuations
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Ensure that your Binghamton business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Knowing the fair market value of your business can help your future. 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. Assets and liabilities are complicated. A helping hand through the process of business valuation can make the process easier. We know how to assist you with a business valuation whether it is for tax issues, value assessment or any other reason.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. At Redwood, we have built a team grounded in years of expertise and business knowledge. 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.
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 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. 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. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.
The bottom line is that a business valuation, for any reason, is best approached with help. 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 Binghamton, NY.
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 Binghamton
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