How are Echo, OR Businesses Valued?
Have you ever assessed the value of your Echo 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 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 Echo business. This might seem complicated, but we can help. 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 in Echo, OR plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Do Businesses Get Valuations?
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. 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. Teasing out all the reasons a business is valuable is complicated, though. A local business that is important to the community in Echo may have a high value for that particular community, but not for a potential buyer. By the same token, hidden value may lurk in a business that doesn’t seem as impressive at first glance. It comes down to the details.
Therefore, getting experienced accountants to do a valuation is critical. Getting your business valued requires knowledge of finance, tax law, venture capital and the audit process, as well as of your business. 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.
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 methods apply to an array of businesses, whether they’re in Echo or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
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. 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. Assets and liabilities are much easier to see through this theoretical new business. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
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.
One method is to look at assets with a going concern. 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 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. It is possible that a different method is more suitable for your particular business. There are certainly some businesses, such as those that are in a sole proprietorship, that would be well-advised to take a different 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.
Determining Value Based on the Market
A market-based approach looks at the market as a whole and not solely at your business. The value of other businesses in Echo could provide insight on your own. The goal is to see what your business would be worth by comparing it to other similar businesses.
The advantage to this approach is that it looks more comprehensively at the overall business climate for your particular field. 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.
Income- or Earning-Based Approach
This approach to business valuation looks at potential and future value in order to draw conclusions. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. 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.
There are, as with other methods, additional considerations here, such as the type of business you run. 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. There are other value assessments that serve difficult purposes. Others focus on things such as patents and 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. When compensation comes in the form of stocks like this it is considered a special type of deferred payment that has to be reported.
It’s not as confusing as it seems. Ultimately, it is a matter of reporting stock earnings. For one thing, this type of valuation can help a business find its fair market value. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. 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. 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.
An accountant such as the ones at Redwood can be a crucial ally in trying to sort through the 409A valuation process any time you find you need to do one. They can also help you choose the best approach to this valuation for your circumstances and business needs.
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. You may be hoping to see how much you could make by selling your company. Figuring out your tax liability is another common reason for seeking out a business valuation.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. 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. Perhaps you want to ensure compliance with tax reporting or, conversely, find the fair market value of your business.
The intimate details of IRS regulations, business and finance can be a complex maze to try to sort through. While you’re concerned with your business running smoothly, let experts tackle the ins and outs of a getting a valuation done.
Valuations for IP and Patents
Finding the value of intellectual property and patents is a specialized field. Most businesses do have some sort of intangible property that want to protect and valuate, though. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. 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. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. 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. 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.
Getting a Business Valuation Done Right
Come to Redwood Valuation Partners when the time comes for your business valuation. Ensure that your Echo business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Knowing the fair market value of your business can help your future. This may be because you intend to sell your company or because you want to stay in compliance with 409A. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. Assets and liabilities are complicated. 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.
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. 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. And our customized reports will include all the detail you need to make business decisions based on your valuation. See both subjective and objective elements of your valuation with an in-depth look at your business. 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. Redwood has the experts on hand to make your business valuation a painless process with lots of benefits. 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 Echo, OR.
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 Echo
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