How are Montgomery, TX Businesses Valued?
Have you ever assessed the value of your Montgomery business? Assessing the value of your Montgomery business can be more complicated than just working out the value of its assets. 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 Montgomery business. If this sounds technical, don’t worry. 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 Montgomery, TX plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Montgomery 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. If you are considering selling your business, it’s critical to get a valuation first so that you can go into negotiations with potential buyers armed with knowledge and data.
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 Montgomery 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.
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. If you are interested in stock compensation, expenses or selling price, you will see a lot of benefits from a well-done business valuation. However, any advantages of doing a valuation are up to you and your business. A free consultation from Redwood may help you clarify the reasons for your valuation and the best approach for your particular business.
What Approaches Are There to 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. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Determining Value Based on Assets
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. An accountant going forward with an asset-based mindset is theoretically attempting to imagine what it would cost to set up another, identical business. Assets and liabilities are much easier to see through this theoretical new business. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
It sounds straightforward, but there are hidden complexities. 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. The accountant looks at the company’s net balance sheet to find the value of its assets and then deducts the value of its 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. Asset-based approaches are not appropriate for all business. As one example, a business that is owned in the name of a single person ” a sole proprietorship ” should be advised not to take this approach. A corporation, however, could find value in an assessment that is asset-based, as its assets are owned by the entire company and not one person.
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. For example, you could compare your business to others located in Montgomery. 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. 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.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
Looking at Income or Earnings
This approach to business valuation looks at potential and future value in order to draw conclusions. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. 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. 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.
Types of Valuations
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.
Getting a 409A Valuation
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 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. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.
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.
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.
Business Valuations/Looking at Business Valuations
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. 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. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. 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.
IP and Patent Valuations
Finding the value of intellectual property and patents is a specialized field. 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. 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. These assets can be difficult to appraise as they are often intangible and difficult to define. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
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. Purchase price is the crucial outcome of such an evaluation of a business.
A purchase price allocation ultimately comes down to determining what various parts of a purchased business are worth, including assets and liabilities. 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.
Getting a Business Valuation Done Right
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether your business is in Montgomery 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.
Knowing the fair market value of your business can help your future. 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. Get experts on your side who know how to cut through the complicated legal language to get you the information you need. We know how to assist you with a business valuation whether it is for tax issues, value assessment or any other reason.
While venture capital and auditing can be complicated, we believe teamwork and expertise can help manage the process of a valuation. At Redwood, we have built a team grounded in years of expertise and business knowledge. We understand that many of our clients come from high-pressure startups and growth-focused companies with tight 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. We go beyond the standard valuation to offer a free consultation, as well as audit defense and customized reports. 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. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
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. Find out how to get started with a 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 Montgomery, TX.
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 Montgomery
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