Assessing Business Value in Inwood
Do you know how much your Inwood business is worth? Assessing the value of your Inwood business can be more complicated than just working out the value of its assets. 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 Inwood 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 Valuation in Inwood, WV plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Inwood Business Valued?
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. Anyone hoping to sell a business will be better positioned during negotiations if they have gotten a thorough business valuation before any talks began.
A business valuation shows not just overall worth, but also where that value originates from. Teasing out all the reasons a business is valuable is complicated, though. A local business that is important to the community in Inwood 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 all depends on your perspective.
Therefore, getting experienced accountants to do a valuation is critical. An accountant doing a valuation needs to know tax law, the audit process and finance, as well as information about 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. But the reasons and advantages of a valuation are different for every circumstance. A free consultation from Redwood may help you clarify the reasons for your valuation and the best approach for your particular business.
Approaches to Business Valuation
When assessing the value of any business, there are three broad approaches that are considered standard. 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 Inwood or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
Looking at Assets
While it may sound obvious, there are actually a few approaches to looking at a business’s assets In this approach, a business’s investments are added up to determine value. 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. This exercise can reveal a lot of information about a business, including its liabilities and assets. The difference between the assets and the liabilities of the company is the business’ value.
It sounds straightforward, but there are hidden complexities. In practice, determining which assets and liabilities to include, and how, is a tricky process. 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 a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. The net cash received from such a liquidation is the business’ value.
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. 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, in which all assets are owned by the company as a whole, is a much better candidate for an asset-based approach.
A market-based approach looks at the market as a whole and not solely at your business. The value of other businesses in Inwood could provide insight on your own. 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. 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. Non-competition clauses and private information can hinder this approach, making it difficult or potentially even impossible to get the information necessary for this type of valuation.
Making a Valuation Based on Income or Earnings
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.
Of course, assessing value this way comes along with the risk of assumptions and predictions that invite uncertainty. However, they can use hard data to back up this prediction. 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. 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. 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. Business valuations are just one type of valuation that is possible. A different reason for a valuation could include something such as intellectual property.
What is a 409A Valuation?
A 409A valuation looks at stock as it relates to the value of your business. Stocks are frequently given to employees and contractors as part of their earnings from working. 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 sounds complicated. 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. 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.
Often, you will know you need this type of valuation because it will be legally required of 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. 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. Or you might be hoping to assess your tax liability by looking at your business’ value.
A practiced accountant can help navigate enterprise and equity valuations for businesses. Redwood’s expert team has grown to keep pace with our increasing client needs. 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.
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. Other reasons for IP and patent valuations include business planning, mergers and acquisitions and litigation support.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. It is sometimes complicated to find the value of these intangible assets. 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.
Purchase Price Allocations (ASC 805)
You may be required to do a purchase price allocation. 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
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether you are comparing your business to others in Inwood 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.
Often, you will need to know the fair market value of 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. Whether it’s finance, tax issues or business, our accountants are prepared to navigate the technicalities with you.
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. We understand that many of our clients come from high-pressure startups and growth-focused companies with tight 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 the obvious, our valuations include customized reports, audit defense and free consultations. If you aren’t sure where to start, we can guide you through the process right from the start. And our customized reports will include all the detail you need to make business decisions based on your valuation. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. 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. Redwood has the experts on hand to make your business valuation a painless process with lots of benefits. A free consultation may be the perfect starting point.
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 Inwood, WV.
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 Inwood
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