Assessing Business Value in Clarksville
Have you ever wondered how much your business is actually worth? There are a number of intricate details that you have to evaluate in order to find your business’ fair market value. 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 Valuation, IRC 409A Valuation, Purchase Price Allocation in Clarksville, VA
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Top Reasons to Seek a Business Valuation
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.
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 Clarksville is perhaps not as highly valued in a different city. By the same token, hidden value may lurk in a business that doesn’t seem as impressive at first glance. The particulars of a business will determine the outcome.
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. But the benefits of a business valuation come in many forms, from stock compensation to expenses to selling prices. However, any advantages of doing a valuation are up to you and your business. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.
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. While there may be other approaches, these three encompass the main methods of assessing a business’ value. These methods apply to an array of businesses, whether they’re in Clarksville or elsewhere. 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 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. In practice, determining which assets and liabilities to include, and how, is a tricky process. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.
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. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. After a real liquidation, the business would receive cash; this now becomes the business’s value in a valuation.
Choosing an asset focused method of business valuation maybe right for your business. It is possible that a different method is more suitable for your particular 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. By contrast, corporations spread out the ownership of assets throughout the company and could benefit more greatly from a valuation based on assets.
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. The value of other businesses in Clarksville 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. 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.
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. The accountant doing the valuation can even “normalize” figures to remove unusual spikes or dips that could make the assessment less precise. 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.
Different Kinds of Business 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. Others focus on things such as patents and intellectual property.
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. It is common for employees in many fields to receive stocks as compensation. 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 may seem overwhelming. What it comes down to is stock options. 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.
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.
Valuations for Businesses
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. Maybe you are wondering how much your business can sell for right now. Or you might be hoping to assess your tax liability by looking at your business’ value.
Equity and enterprise valuations are best handled by a talented accountant. 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.
It takes an experienced team to understand the intricacies of business and finance, as well as IRS regulations. While you’re concerned with your business running smoothly, let experts tackle the ins and outs of a getting a valuation done.
How to Assess IP and Patents
Finding the value of intellectual property and patents is a specialized field. However, this type of valuation can impact a wide range of businesses. 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.
Make sure your patent or intellectual property is protected by understanding what it’s worth on the market. Defining assets that are not necessarily tangible can be complex, though. 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. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. Purchase price is the crucial outcome of such an evaluation of a business.
A purchase price allocation ultimately comes down to determining what various parts of a purchased business are worth, including assets and liabilities. It is not always the case that a business is sold as one whole entity; it may be sold in smaller pieces.
Getting a Business Valuation Done Right
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether your business is in Clarksville 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.
Knowing the fair market value of your business can help your future. Business valuations help in situations where you want to sell, sort out your taxes or simply determine the value of your various assets. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. Assets and liabilities are complicated. That’s where experienced accountants come in to help inform and guide you. We know how to assist you with a business valuation whether it is for tax issues, value assessment or any other reason.
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.
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. 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. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. The comprehensive valuation report will include subjective and objective factors relevant to your particular business. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
In the end, if you need a business valuation, you will likely need help with that valuation. Get Redwood’s experienced team to assist you as you work through a business valuation for any reason. Find out how to get started with a 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 Clarksville, VA.
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 Clarksville
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