How to Find the Value of Your Merced, California Business

Have you ever assessed the value of your Merced business? 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 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 Merced business. This seems like it could be overwhelming, but it shouldn’t be. Our experts at Redwood Valuation Partners have years of experience in business valuation and are eager to help you through the process from start to finish.

409A Valuation in Merced, CA plus IRC 409A Valuation, and Purchase Price Allocation

Call Redwood Valuation Partners for your next business valuation (206) 660-1295

Why Get Your Merced 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. 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 can also help show you where your business’ value comes 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 Merced may have a high value for that particular community, but not for a potential buyer. By the same token, hidden value may lurk in a business that doesn’t seem as impressive at first glance. It comes down to the details.

It’s imperative, then, that your business valuation is handled by professionals. Getting your business valued requires knowledge of finance, tax law, venture capital and the audit process, as well as of 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. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.

Approaches to Business Valuation

An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. There could be other approaches to business valuation, but the three described here encompass the most common methods. These approaches to business valuation are applicable whether your business is located in Merced or not. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.

Determining Value Based on 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. 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. 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. This process gains complexity when the accountant has to decide which assets to include. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.

A going concern asset-based approach is a little more straightforward. 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 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. By contrast, corporations spread out the ownership of assets throughout the company and could benefit more greatly from a valuation based on assets.

Market-Based Approach

Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. This includes looking at other businesses in Merced. The goal is to see what your business would be worth by comparing it to other similar businesses.

The advantage to this approach is that it looks more comprehensively at the overall business climate for your particular field. 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.

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.

Income- or Earning-Based Approach

The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. 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. There is, however, reliable data to back up the value assessment made through this method. The accountant doing the valuation can even “normalize” figures to remove unusual spikes or dips that could make the assessment less precise. The market itself can produce spikes and dips that require an additional capitalization factor to be figured into the assessment.

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.

What Kinds of Valuations Exist?

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.

Getting a 409A Valuation

A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. 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 may seem overwhelming. 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. 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. 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

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. You may be hoping to see how much you could make by selling your company. 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. 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. 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.

How to Assess IP and Patents

Finding the value of intellectual property and patents is a specialized field. Patent and IP valuations come from many different industries in the business world. 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. 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. 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. Of course, the overall goal is to figure out the purchase price for an acquisition.

A purchase price allocation ultimately comes down to determining what various parts of a purchased business are worth, including assets and liabilities. 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

Come to Redwood Valuation Partners when the time comes for your business valuation. Whether your business is in Merced 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.

Fair market value is a crucial piece of information you should have about 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. Intellectual property can be assessed and protected through a business valuation. Don’t get overwhelmed by the details. A helping hand through the process of business valuation can make the process easier. Our team has worked for years in business, finance and tax issues, allowing us to meet the needs of a wide range of businesses.

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. 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.

Our principles when working with clients include intense focus, long experience and grounded expertise, no matter the cause for the valuation. We go beyond the standard valuation to offer a free consultation, as well as audit defense and customized reports. We will even help you get started if you aren’t sure. 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. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.

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. Begin your process with a free consultation.

Client-Focus

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 Merced, CA.

Services

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.

Experience

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.

Contact Us

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.

Merced California business valuation services

409A Valuation Merced

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

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