How to Find the Value of Your Lake Montezuma, Arizona Business
Do you know how much your Lake Montezuma business is worth? Assessing the value of your Lake Montezuma 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 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 Business Valuation Services in Lake Montezuma
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Why Do Businesses Get Valuations?
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. Teasing out all the reasons a business is valuable is complicated, though. It might be surprising to learn that a business with a very high value in Lake Montezuma is perhaps not as highly valued in a different city. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. The particulars of a business will determine the outcome.
That’s why expertise is crucial in a business valuation. An accountant doing a valuation needs to know tax law, the audit process and finance, as well as information about your business. The advantages of doing a business valuation correctly include understanding your selling price and stock compensation. 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.
Different Ways of Approaching Business Valuation
When assessing the value of any business, there are three broad approaches that are considered standard. While there may be other approaches, these three encompass the main methods of assessing a business’ value. These methods apply to an array of businesses, whether they’re in Lake Montezuma or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
Determining Value Based on Assets
Finding the value of a business based on its assets isn’t as straightforward as it sounds. The aim of an asset-based approach is to total the investments of a business. 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 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.
Don’t be fooled by how simple this approach seems at first glance. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.
One method is to look at assets with a going concern. Value here is determined based on the value of the assets the accountant finds in the business contrasted with the cost of any liabilities. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. After liquidation, the accountant can see clearly the value of the business.
Choosing an asset focused method of business valuation maybe right for 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.
Determining Value Based on the Market
A market-based approach looks at the market as a whole and not solely at your business. For example, you could compare your business to others located in Lake Montezuma. 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. 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.
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.
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. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
Of course, assessing value this way comes along with the risk of assumptions and predictions that invite uncertainty. There is, however, reliable data to back up the value assessment made through this method. 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. Sometimes, these predictions are divided by capitalization factors that fluctuate based on the market.
How a business is run and who owns it is an important consideration here, as with other approaches to valuation. 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.
Different Kinds of Business 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. 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. Many businesses offer stock to their employees and contractors. 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. Any employee offered stock as part of their compensation must be able to buy equity in your company at or above the fair market value determined through this valuation. 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. 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.
It is advised that you don’t try to do a 409A valuation yourself, even though you can, and instead let an accountant deal with unforeseen difficulties that you aren’t prepared to handle. They can also help you choose the best approach to this valuation for your circumstances and business needs.
Valuations for Businesses
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. Others desire a business valuation when researching things such as tax liability.
Equity and enterprise valuations are best handled by a talented accountant. 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. 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. You know your business, but evaluating your business against all applicable laws, regulations and financial considerations takes an expert in the field of business valuation.
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.
Once you have a patent or intellectual property that has value, you need to make sure it is protected. It is sometimes complicated to find the value of these intangible assets. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
Purchase Price Allocations (ASC 805)
Purchase price allocations, or ASC 805, may be necessary for your business. This requirement relates to the acquisition of businesses and includes determining the fair market value of the transaction consideration, intangible assets, liabilities and certain tangible assets as of the date of acquisition. Purchase price is the crucial outcome of such an evaluation of a business.
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. 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.
What’s the Bottom Line?
Come to Redwood Valuation Partners when the time comes for your business valuation. Ensure that your Lake Montezuma business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
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.
While venture capital and auditing can be complicated, we believe teamwork and expertise can help manage the process of a valuation. 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. We value your time; let us minimize the burden of complicated valuation details while you focus on what you know best ” 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 audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. If you aren’t sure where to start, we can guide you through the process right from the start. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. 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. 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 Lake Montezuma, AZ.