How to Find the Value of Your Hammond, Louisiana Business
Do you know how much your Hammond 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. 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. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.
409A Valuation, IRC 409A Valuation, Purchase Price Allocation in Hammond, LA
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Hammond Business Valued?
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. The value of any one business could come from entirely different sources than a different business. A local business that is important to the community in Hammond 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. 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. But the reasons and advantages of a valuation are different for every circumstance. 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. 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
While it may sound obvious, there are actually a few approaches to looking at a business’s assets 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. Assets and liabilities are much easier to see through this theoretical new business. The next step involves balancing the assets and liabilities in order to calculate how much value the business holds.
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. A going concern asset-based approach or a liquidation asset-based approach will help you move forward with this appraisal.
The first option is a going concern asset-based approach. 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 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. 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. It is possible that a different method is more suitable for your particular business. For example, a sole proprietorship in which assets are in the name of the business’ owner are not good candidates for this 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.
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. For example, you could compare your business to others located in Hammond. 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.
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
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.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. 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. Additionally, capitalization factors may indicate abnormalities in the market itself that should be considered during a valuation.
How a business is run and who owns it is an important consideration here, as with other approaches to valuation. 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.
Types of Valuations
The types of valuations possible go beyond those meant strictly for businesses trying to sell. Business valuations are just one type of valuation that is possible. A different reason for a valuation could include something such as intellectual property.
Getting a 409A Valuation
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. 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. 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. Fair market value is especially important here because employees with stock need to be able to sell it at or above that mark. In addition to stock, a 409A valuation is required if your company issues bonus plans, salary deferral arrangements and other agreements involving deferred compensation for employees.
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.
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. They can also help you choose the best approach to this valuation for your circumstances and business needs.
Business Valuations/Looking at Business Valuations
Whether you’re negotiating a transaction, planning your business or estate, or involved in entity conversations, business valuations cover a wide range of situations and companies. Perhaps you are interested in finding the likely selling price of your business on the market. 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. 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. Whether you want to find your fair market value or do tax or financial reporting on your business, we are prepared to help you through the process.
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.
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. 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.
Once you have a patent or intellectual property that has value, you need to make sure it is protected. Defining assets that are not necessarily tangible can be complex, though. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
Assessing Purchase Price Allocations for Business
Purchase price allocations, or ASC 805, may be necessary for your business. 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
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Whether your business is in Hammond 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. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. The intricacies can seem overwhelming. That’s where experienced accountants come in to help inform and guide you. Whether it’s finance, tax issues or business, our accountants are prepared to navigate the technicalities with you.
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. We understand that many of our clients come from high-pressure startups and growth-focused companies with tight deadlines. We value your time; let us minimize the burden of complicated valuation details while you focus on what you know best ” your business.
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. 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. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. See both subjective and objective elements of your valuation with an in-depth look at your 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.
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. 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 Hammond, LA.
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 Hammond
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