How to Find the Value of Your Canterbury, New Hampshire Business
Do you know how much your Canterbury business is worth? Assessing the value of your Canterbury 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. 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 Canterbury
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Why Do Businesses Get Valuations?
If you want to know exactly how much your business may be worth if you sold it, you should seek a business valuation. Anyone hoping to sell a business will be better positioned during negotiations if they have gotten a thorough business valuation before any talks began.
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. A business that is important for a particular city, such as Canterbury, may have high value there, but not elsewhere. 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. An accountant doing a valuation needs to know tax law, the audit process and finance, as well as information about your business. The advantages of doing a business valuation correctly include understanding your selling price and stock compensation. 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
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. These approaches to business valuation are applicable whether your business is located in Canterbury or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
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. 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. 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.
Don’t be fooled by how simple this approach seems at first glance. In practice, determining which assets and liabilities to include, and how, is a tricky process. 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 a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. 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. 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, in which all assets are owned by the company as a whole, is a much better candidate for an asset-based approach.
A market-based approach looks at the market as a whole and not solely at your business. The value of other businesses in Canterbury could provide insight on your own. 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.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. 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.
Income- or Earning-Based Approach
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. There is, however, reliable data to back up the value assessment made through this method. 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.
Again, sole proprietorship and the exact style of business can impact the ultimate valuation here. How customers view a business is a factor that is not captured in income figures or market values but that can impact a business’s value.
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.
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. Stocks given to employees are regarded by the IRS as deferred income ” income given to someone in one year but actually paid in a different year.
This sounds complicated. Ultimately, it is a matter of reporting stock earnings. Businesses who need this form of valuation need it in order to determine the fair market value of their business. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.
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. 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
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.
A practiced accountant can help navigate enterprise and equity valuations for businesses. Redwood’s expert team has grown to keep pace with our increasing client needs. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. 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. While you’re concerned with your business running smoothly, let experts tackle the ins and outs of a getting a valuation done.
IP and Patent Valuations
Intellectual property and patents have separate valuation concerns. Patent and IP valuations come from many different industries in the business world. IP and patents are always under threat from competing trademarks and leaked trade secrets, as well as tax concerns. 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.
Purchase Price Allocations (ASC 805)
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. This is particularly important for assessing purchase prices in 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.
What’s the Bottom Line?
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Ensure that your Canterbury 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. Business valuations help in situations where you want to sell, sort out your taxes or simply determine the value of your various assets. Intellectual property can be assessed and protected through a business valuation. The intricacies can seem overwhelming. 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.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. Our valuation associates and analysts have worked in their field for years, becoming respected experts. Many of the people we work with come from high-pressure environments with tough deadlines. 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. We go beyond the standard valuation to offer a free consultation, as well as audit defense and customized reports. 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. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.
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 Canterbury, NH.
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 Canterbury
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