How are Franklin, GA Businesses Valued?
Do you know how much your Franklin business is worth? Assessing the value of your Franklin business can be more complicated than just working out the value of its assets. 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 seems like it could be overwhelming, but it shouldn’t be. 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 Franklin, GA 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?
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.
In addition to how much a business is worth, a valuation can show which parts of a business are valuable. There are as many factors involved in the value of a business as there are businesses themselves. A business that is important for a particular city, such as Franklin, may have high value there, but not elsewhere. By the same token, hidden value may lurk in a business that doesn’t seem as impressive at first glance. It all depends on your perspective.
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. The advantages of doing a business valuation correctly include understanding your selling price and stock compensation. However, any advantages of doing a valuation are up to you and your business. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
Approaches to Business Valuation
There are three main approaches to business valuation that an accountant or business valuator will use. 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 Franklin or elsewhere. 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
There are several asset-based approaches possible for business valuation. 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. The difference between the assets and the liabilities of the company is the business’ value.
Of course, this approach is deceptively simple. This process gains complexity when the accountant has to decide which assets to include. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.
A going concern asset-based approach is a little more straightforward. Simply put, the accountant can subtract the value of any liabilities from the assets that the business has. In the other approach, a liquidation asset-based approach, the accountant first imagines that all the assets and liabilities were paid off, as though the business was liquidated. 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. 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, however, could find value in an assessment that is asset-based, as its assets are owned by the entire company and not one person.
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 Franklin. The goal is to see what your business would be worth by comparing it to other similar businesses.
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. An accountant using this approach will try to determine the fair market value of your business and what a buyer is likely to pay for it in the current climate.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
Looking at Income or Earnings
The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. 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. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. Additionally, capitalization factors may indicate abnormalities in the market itself that should be considered during a valuation.
There are, as with other methods, additional considerations here, such as the type of business you run. 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.
What Kinds of Valuations Exist?
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. Someone with a patent, for example, may also seek a valuation of their 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. It simply means those stocks have to be accounted for. 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. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.
Sometimes it is a matter of compliance with the law to get a 409A valuation for your business. 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.
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. Experience and expertise are key benefits that only an accountant can offer if you have to work through a 409A valuation.
Business Valuations/Looking at Business Valuations
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 years of experience and a comprehensive team, we are prepared to take on a host of business valuations needs. Business valuation could include tax or financial reporting, assessment of fair market value or for purchase price allocations.
IRS regulations, business needs and finance are complex fields that call for knowledge and specialization. A valuation is an added complexity on top of keeping your business running, so allow our accountants to handle valuations for you.
IP and Patent Valuations
Intellectual property and patents have separate valuation concerns. Most businesses do have some sort of intangible property that want to protect and valuate, though. 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.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. 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.
Assessing Purchase Price Allocations for Business
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. In a transaction, a lot of smaller pieces of a company can be traded and purchased and it’s important to understand the value of all of these.
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 Franklin 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.
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. 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.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. 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 value your time; let us minimize the burden of complicated valuation details while you focus on what you know best ” 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. Along with audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. We can assist you from the very beginning if you don’t know where to 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. 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. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. 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 Franklin, GA.
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 Franklin
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