Assessing Business Value in Kekaha
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. 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 in Kekaha, HI plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Kekaha 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 shows not just overall worth, but also where that value originates from. 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 Kekaha, 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.
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. But the benefits of a business valuation come in many forms, from stock compensation to expenses to selling prices. 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.
Different Ways of Approaching 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. No matter where your business is located, these methods can help you find your business’s value. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
Looking at Assets
There are several asset-based approaches possible for business valuation. 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 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.
Of course, this approach is deceptively simple. This process gains complexity when the accountant has to decide which assets to include. 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. 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. 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. 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.
Looking at the Market
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. The value of other businesses in Kekaha 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.
This approach encounters difficulties in that often other businesses are not eager to share their worth with competitors. 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.
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. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
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. 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. Sometimes, these predictions are divided by capitalization factors that fluctuate based on the market.
There are, as with other methods, additional considerations here, such as the type of business you run. If a business is strongly linked with its owner and that owner sells or leaves the business, an evaluation based on past performance could lose its validity depending on how customers react to the change.
Types of Valuations
A valuation has benefits beyond just figuring out what a business is worth and there is therefore a lot of variety in types of valuations. Business valuations are just one type of valuation that is possible. A different reason for a valuation could include something such as intellectual 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. 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. 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. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. 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.
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. Experience and expertise are key benefits that only an accountant can offer if you have to work through a 409A valuation.
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. Perhaps you are interested in finding the likely selling price of your business on the market. 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. At Redwood, we’ve seen our clients’ needs expand as our own business has expanded. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. Perhaps you want to ensure compliance with tax reporting or, conversely, find the fair market value of your business.
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. Patent and IP valuations come from many different industries in the business world. IP and patents are always under threat from competing trademarks and leaked trade secrets, as well as tax concerns. 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. 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.
What is a Purchase Price Allocation?
You may be required to do a purchase price allocation. 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.
This type of business valuation looks at all the different parts of a business to determine its value. It is not always the case that a business is sold as one whole entity; it may be sold in smaller pieces.
The Last Word on Business Valuations
At Redwood Valuation Partners, we are experts in business valuation. Whether you are comparing your business to others in Kekaha 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. Business valuations help in situations where you want to sell, sort out your taxes or simply determine the value of your various assets. Intellectual property can be assessed and protected through a business valuation. Don’t get overwhelmed by the details. Get experts on your side who know how to cut through the complicated legal language to get you the information you need. 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. Our valuation associates and analysts have worked in their field for years, becoming respected experts. 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.
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. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
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. 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 Kekaha, HI.
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 Kekaha
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