How are Dysart, IA Businesses Valued?
Have you ever assessed the value of your Dysart business? 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. This might seem complicated, but we can help. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.
409a Business Valuation Services in Dysart
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Dysart 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. Don’t try to go into business negotiations about selling a business before you’ve gotten a valuation from a skilled accountant who’s an expert in the field.
A business valuation can also help show you where your business’ value comes from. The value of any one business could come from entirely different sources than a different business. A business that is important for a particular city, such as Dysart, may have high value there, but not elsewhere. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. It comes down to the details.
Therefore, getting experienced accountants to do a valuation is critical. 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. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.
Different Ways of Approaching 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 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. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
It sounds straightforward, but there are hidden complexities. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. Additionally, there are two different ways of going about this process: a going concern asset-based approach and a liquidation asset-based approach.
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. 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.
The type of asset-based approach you choose depends on your business. 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. By contrast, corporations spread out the ownership of assets throughout the company and could benefit more greatly from a valuation based on assets.
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. The value of other businesses in Dysart 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.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. 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.
It would be great if the sort of information necessary for this approach was easy to obtain, but it is not always the case that competing businesses will divulge the necessary figures. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
Making a Valuation Based on Income or Earnings
An income- or earning-based approach is different from the other two in that it is concerned with future potential. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
Of course, assessing value this way comes along with the risk of assumptions and predictions that invite uncertainty. Some of this uncertainty is offset by the ability to use concrete data to calculate this valuation. 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
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. A business valuation is not the only type of assessment that is possible. Others focus on things such as patents and intellectual property.
What is a 409A Valuation?
A 409A valuation looks at stock as it relates to the value of your business. Many businesses offer stock to their employees and contractors. 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. What it comes down to is stock options. 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. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.
Sometimes it is a matter of compliance with the law to get a 409A valuation for your business. 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.
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
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. 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. As our clients have expanded, so has Redwood, increasing the size and expertise of our team. 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
Intellectual property and patents have separate valuation concerns. 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.
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. 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.
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.
This type of business valuation looks at all the different parts of a business to determine its value. 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
At Redwood Valuation Partners, we are experts in business valuation. Whether you are comparing your business to others in Dysart 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. 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. Don’t get overwhelmed by the details. 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.
While venture capital and auditing can be complicated, we believe teamwork and expertise can help manage the process of a valuation. 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.
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. Along with audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. 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. The comprehensive valuation report will include subjective and objective factors relevant to your particular 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 Dysart, IA.
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 Dysart
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