Assessing Business Value in Minneola
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. 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 Minneola, KS plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Do Businesses Get Valuations?
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. 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. Teasing out all the reasons a business is valuable is complicated, though. A local business that is important to the community in Minneola 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.
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. 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. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.
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. There could be other approaches to business valuation, but the three described here encompass the most common methods. These methods apply to an array of businesses, whether they’re in Minneola or elsewhere. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Looking at Assets
While it may sound obvious, there are actually a few approaches to looking at a business’s assets 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 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. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. Additionally, there are two different ways of going about this process: a going concern asset-based approach and 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. In a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. 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. 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. 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. This includes looking at other businesses in Minneola. Viewing your business side-by-side with other, similar ventures can provide crucial information for figuring out the value of a business.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. 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. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a 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. 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. 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.
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.
What Kinds of Valuations Exist?
Not all valuations are the same and not all valuations are confined strictly to businesses. A business valuation is not the only type of assessment 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. Many businesses offer stock to their employees and contractors. Such businesses need a 409A valuation because that stock is considered a form of income offered in one year but paid out in a different year.
This sounds complicated. Ultimately, it is a matter of reporting stock earnings. 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. 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.
Often, you will know you need this type of valuation because it will be legally required of your business. Additional 409A valuations could be required at the end of a new round of funding or once a year, even if you have gotten this type of valuation in the past already.
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.
Business Valuations/Looking at Business Valuations
Some of the reasons for a business valuation include things such as entity discussions and business negotiations, but they are also useful while planning a business or estate. 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.
Equity and enterprise valuations are best handled by a talented accountant. At Redwood, we’ve seen our clients’ needs expand as our own business has expanded. 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. While you’re concerned with your business running smoothly, let experts tackle the ins and outs of a getting a valuation done.
How to Assess IP and Patents
Patents and intellectual property also require their own valuations. However, this type of valuation can impact a wide range of businesses. 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. Yet for many businesses, understanding those assets and their precise worth can add value and keep the company in compliance with all applicable laws.
What is a Purchase Price Allocation?
Purchase price allocations, or ASC 805, may be necessary for your business. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. This is particularly important for assessing purchase prices in 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 Minneola 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. 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. Assets and liabilities are complicated. That’s where experienced accountants come in to help inform and guide you. Our team has worked for years in business, finance and tax issues, allowing us to meet the needs of a wide range of businesses.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. Our team consists of experts who have worked in their specialties for years. 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 audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. We will even help you get started if you aren’t sure. 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. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
In the end, if you need a business valuation, you will likely need help with that valuation. 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 Minneola, KS.
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 Minneola
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