How to Find the Value of Your Makawao, Hawaii Business
Have you ever assessed the value of your Makawao business? Assessing the value of your Makawao business can be more complicated than just working out the value of its assets. 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. This seems like it could be overwhelming, but it shouldn’t be. 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 Makawao, HI
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Do Businesses Get Valuations?
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.
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 local business that is important to the community in Makawao may have a high value for that particular community, but not for a potential buyer. In contrast, a business that seems modest and small may actually hold a lot of value for a 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. 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. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
Different Ways of Approaching Business Valuation
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. 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 Makawao or elsewhere. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.
While it may sound obvious, there are actually a few approaches to looking at a business’s assets The overall goal is to add together all the investments in the business. One way to go about looking at a business’s assets is by figuring out how much it would cost to set up a brand new business that mimics the existing one. 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. In practice, determining which assets and liabilities to include, and how, is a tricky process. 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. Simply put, the accountant can subtract the value of any liabilities from the assets that the business has. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. After a real liquidation, the business would receive cash; this now becomes the business’s value in a valuation.
The type of asset-based approach you choose depends on your business. It is possible that a different method is more suitable for your particular business. 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.
Looking at the Market
It can be useful in a valuation to look at the bigger picture and see what a business is worth compared to the rest of the market. For example, you could compare your business to others located in Makawao. 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. 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. 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
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.
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. 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. 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
Not all valuations are the same and not all valuations are confined strictly to businesses. There are other value assessments that serve difficult purposes. A different reason for a valuation could include something such as intellectual property.
What is a 409A Valuation?
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. When compensation comes in the form of stocks like this it is considered a special type of deferred payment that has to be reported.
It’s not as confusing as it seems. It simply means those stocks have to be accounted for. 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. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.
Often, you will know you need this type of valuation because it will be legally required of your business. 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.
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. Maybe you are wondering how much your business can sell for right now. Figuring out your tax liability is another common reason for seeking out a business valuation.
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. 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. 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.
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. 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
Another requirement businesses encounter is ASC 805. 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.
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.
What’s the Bottom Line?
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether your business is in Makawao 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. Whether you are looking to assess your value for the sake of selling or have yearly tax considerations, a business valuation will help. 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.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. Our valuation associates and analysts have worked in their field for years, becoming respected experts. We know the pressures and stress of running a successful business. We let you get to the important work of running your business while we take care of the intricacies of business valuation.
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. We can assist you from the very beginning if you don’t know where to start. And our customized reports will include all the detail you need to make business decisions based on your valuation. See both subjective and objective elements of your valuation with an in-depth look at your business. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
If you do want to find the value of your business or assets, having skilled assistance can be a boon. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. 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 Makawao, 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 Makawao
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