How are Eureka, NV Businesses Valued?
Do you know how much your Eureka business is 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. 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 Eureka business. This seems like it could be overwhelming, but it shouldn’t be. 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 Eureka
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Eureka Business Valued?
If you want to know exactly how much your business may be worth if you sold it, you should seek a business valuation. 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.
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 local business that is important to the community in Eureka may have a high value for that particular community, but not for a potential buyer. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. It comes down to the details.
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. 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?
When assessing the value of any business, there are three broad approaches that are considered standard. There could be other approaches to business valuation, but the three described here encompass the most common methods. These approaches to business valuation are applicable whether your business is located in Eureka or not. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.
Finding the value of a business based on its assets isn’t as straightforward as it sounds. The overall goal is to add together all the investments in the business. 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. 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. In practice, determining which assets and liabilities to include, and how, is a tricky process. Additionally, there are two different ways of going about this process: a going concern asset-based approach and a liquidation asset-based approach.
The first option is a going concern asset-based approach. 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. The net cash received from such a liquidation is the business’ value.
Choosing an asset focused method of business valuation maybe right for your business. There are other approaches if focusing on assets is not right for your situation and goals. 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.
A market-based approach looks at the market as a whole and not solely at your business. For example, you could compare your business to others located in Eureka. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
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. 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
The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
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. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. The market itself can produce spikes and dips that require an additional capitalization factor to be figured into the assessment.
Again, sole proprietorship and the exact style of business can impact the ultimate valuation here. Sole proprietorship could mean that a business’s identity is so closely linked to its owner that selling it incurs particular risks that can not be predicted based on earnings alone.
Types of Valuations
Not all valuations are the same and not all valuations are confined strictly to businesses. A business valuation is not the only type of assessment that is possible. 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. 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. What it comes down to is stock options. A benefit of this form of business valuation is that it can determine a company’s fair market value. Fair market value is especially important here because employees with stock need to be able to sell it at or above that mark. 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. Even if you have gotten a 409A valuation in the past for your business, the law could require that you get another one each year or every time a new round of funding closes.
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. Maybe you are wondering how much your business can sell for right now. Others desire a business valuation when researching things such as tax liability.
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 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.
It takes an experienced team to understand the intricacies of business and finance, as well as IRS regulations. 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. Patent and IP valuations come from many different industries in the business world. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. Litigation, mergers, acquisitions and business planning provide additional cause for an IP and patent valuation.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. These assets can be difficult to appraise as they are often intangible and difficult to define. Yet for many businesses, understanding those assets and their precise worth can add value and keep the company in compliance with all applicable laws.
Purchase Price Allocations (ASC 805)
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.
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. 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
At Redwood Valuation Partners, we are experts in business valuation. Ensure that your Eureka 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. 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. 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.
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. 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 the obvious, our valuations include customized reports, audit defense and free consultations. We can assist you from the very beginning if you don’t know where to start. Take a deeper look at your business with the customized report we provide as part of our valuations. 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.
In the end, if you need a business valuation, you will likely need help with that valuation. 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 Eureka, NV.
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 Eureka
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