How are Cloverdale, IN Businesses Valued?
Have you ever wondered how much your business is actually worth? 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. 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 Cloverdale, IN
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Cloverdale 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. A local business that is important to the community in Cloverdale may have a high value for that particular community, but not for a potential buyer. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. It all depends on your perspective.
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. 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.
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 Cloverdale or elsewhere. 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. In this approach, a business’s investments are added up to determine value. One way to go about looking at a business’s assets is by figuring out how much it would cost to set up a brand new business that mimics the existing one. This exercise can reveal a lot of information about a business, including its liabilities and assets. The difference between the assets and the liabilities of the company is the business’ value.
Of course, this approach is deceptively simple. 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. 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. In a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. 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. 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.
Determining Value Based on the Market
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. This includes looking at other businesses in Cloverdale. 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.
This approach encounters difficulties in that often other businesses are not eager to share their worth with competitors. 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. Some of this uncertainty is offset by the ability to use concrete data to calculate this valuation. 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.
Different Kinds of Business Valuations
The types of valuations possible go beyond those meant strictly for businesses trying to sell. There are other value assessments that serve difficult purposes. A different reason for a valuation could include something such as intellectual property.
This type of valuation is concerned with the stocks connected to 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.
It’s not as confusing as it seems. It simply means those stocks have to be accounted for. For one thing, this type of valuation can help a business find its 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. 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.
It is advised that you don’t try to do a 409A valuation yourself, even though you can, and instead let an accountant deal with unforeseen difficulties that you aren’t prepared to handle. They can also help you choose the best approach to this valuation for your circumstances and business needs.
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. You may be hoping to see how much you could make by selling your company. Others desire a business valuation when researching things such as tax liability.
Equity and enterprise valuations are best handled by a talented accountant. 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. Business valuation could include tax or financial reporting, assessment of fair market value or for purchase price allocations.
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.
Valuations for IP and Patents
Patents and intellectual property also require their own valuations. However, this type of valuation can impact a wide range of businesses. 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. Litigation, mergers, acquisitions and business planning provide additional cause for an IP and patent valuation.
Make sure your patent or intellectual property is protected by understanding what it’s worth on the market. 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?
Another requirement businesses encounter is ASC 805. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. Of course, the overall goal is to figure out the purchase price for an acquisition.
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.
The Last Word on Business Valuations
At Redwood Valuation Partners, we are experts in business valuation. Whether your business is in Cloverdale 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.
Often, you will need to know the fair market value of 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. Assets and liabilities are complicated. 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.
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. We know the pressures and stress of running a successful business. 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. 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. The comprehensive valuation report will include subjective and objective factors relevant to your particular 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.
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 Cloverdale, IN.
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 Cloverdale
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