How are Hornbrook, CA Businesses Valued?
Have you ever wondered how much your business is actually 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 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 Valuation in Hornbrook, CA plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Top Reasons to Seek a Business Valuation
If you want to know exactly how much your business may be worth if you sold it, you should seek a business valuation. Anyone hoping to sell a business will be better positioned during negotiations if they have gotten a thorough business valuation before any talks began.
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 business that is important for a particular city, such as Hornbrook, may have high value there, but not elsewhere. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. The particulars of a business will determine the outcome.
It’s imperative, then, that your business valuation is handled by professionals. 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. But the benefits of a business valuation come in many forms, from stock compensation to expenses to selling prices. 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.
What Approaches Are There 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 approaches to business valuation are applicable whether your business is located in Hornbrook or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Finding the value of a business based on its assets isn’t as straightforward as it sounds. In this approach, a business’s investments are added up to determine value. 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.
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.
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. In a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. After liquidation, the accountant can see clearly the value of the business.
The type of asset-based approach you choose depends on your business. There are other approaches if focusing on assets is not right for your situation and goals. 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.
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 Hornbrook. The goal is to see what your business would be worth by comparing it to other similar businesses.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. In this approach, it is also very important to consider what a buyer in the market would currently pay for your business and what the fair market value would be.
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. Some of the difficulty with a market focused approach arises when you encounter non-competition clauses and other information a business has decided to make private.
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.
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. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. Sometimes, these predictions are divided by capitalization factors that fluctuate based on the market.
Again, sole proprietorship and the exact style of business can impact the ultimate valuation here. 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.
Different Kinds of Business Valuations
The types of valuations possible go beyond those meant strictly for businesses trying to sell. A business valuation is not the only type of assessment that is possible. Others focus on things such as patents and intellectual property.
Getting a 409A Valuation
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. Such businesses need a 409A valuation because that stock is considered a form of income offered in one year but paid out in a different year.
It’s not as confusing as it seems. What it comes down to is stock options. Businesses who need this form of valuation need it in order to determine the fair market value of their business. 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.
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.
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. You may be hoping to see how much you could make by selling your company. Or you might be hoping to assess your tax liability by looking at your business’ value.
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. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. 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
Finding the value of intellectual property and patents is a specialized field. However, this type of valuation can impact a wide range of businesses. 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.
Assessing Purchase Price Allocations for Business
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. Purchase price is the crucial outcome of such an evaluation of a business.
This type of business valuation looks at all the different parts of a business to determine its 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.
The Last Word on Business Valuations
At Redwood Valuation Partners, we are experts in business valuation. Ensure that your Hornbrook 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. You also could seek a business valuation in order to protect a patent. Assets and liabilities are complicated. 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.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. Our team consists of experts who have worked in their specialties for years. 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.
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 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. 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.
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 Hornbrook, CA.
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 Hornbrook
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