How to Find the Value of Your Canada, Kentucky Business
Have you ever assessed the value of your Canada business? Assessing the value of your Canada 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 Canada 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 Canada, KY
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Canada Business Valued?
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. It might be surprising to learn that a business with a very high value in Canada 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. The particulars of a business will determine the outcome.
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. But the reasons and advantages of a valuation are different for every circumstance. A free consultation from Redwood may help you clarify the reasons for your valuation and the best approach for your particular business.
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. These three approaches are not the only possible ways of looking at a business’s value, however. These approaches to business valuation are applicable whether your business is located in Canada or not. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.
Looking at Assets
Finding the value of a business based on its assets isn’t as straightforward as it sounds. The aim of an asset-based approach is to total the investments of a 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. The difference between the assets and the liabilities of the company is the business’ value.
Don’t be fooled by how simple this approach seems at first glance. 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.
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. In a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. 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. There are other approaches if focusing on assets is not right for your situation and goals. 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.
Looking at 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 Canada. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
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.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. 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.
Income- or Earning-Based Approach
This approach to business valuation looks at potential and future value in order to draw conclusions. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
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. The market itself can produce spikes and dips that require an additional capitalization factor to be figured into the assessment.
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.
Types of Valuations
Not all valuations are the same and not all valuations are confined strictly to businesses. 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. 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.
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. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.
Often, you will know you need this type of valuation because it will be legally required of your business. 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. 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.
Business Valuations/Looking at Business Valuations
A business valuation is a general term and can be suitable for a myriad of situations, including during negotiations, while planning a business or during entity conversations. Perhaps you are interested in finding the likely selling price of your business on the market. 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. Redwood’s expert team has grown to keep pace with our increasing client needs. We years of experience and a comprehensive team, we are prepared to take on a host of business valuations needs. 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
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. Other reasons for IP and patent valuations include business planning, mergers and acquisitions and litigation support.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. 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.
Assessing Purchase Price Allocations for Business
Another requirement businesses encounter is ASC 805. 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. 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.
What’s the Bottom Line?
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Whether you are comparing your business to others in Canada 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. You also could seek a business valuation in order to protect a patent. The intricacies can seem overwhelming. A helping hand through the process of business valuation can make the process easier. Our team has worked for years in business, finance and tax issues, allowing us to meet the needs of a wide range of businesses.
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. 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 the obvious, our valuations include customized reports, audit defense and free consultations. We will even help you get started if you aren’t sure. 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. 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. 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 Canada, KY.
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 Canada
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