How are New Castle, PA Businesses Valued?
Do you know how much your New Castle business is 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 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 New Castle
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Why Get Your New Castle 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.
In addition to how much a business is worth, a valuation can show which parts of a business are valuable. The value of any one business could come from entirely different sources than a different business. It might be surprising to learn that a business with a very high value in New Castle is perhaps not as highly valued in a different city. By the same token, hidden value may lurk in a business that doesn’t seem as impressive at first glance. It all depends on your perspective.
It’s imperative, then, that your business valuation is handled by professionals. 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. However, any advantages of doing a valuation are up to you and your business. 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. These three approaches are not the only possible ways of looking at a business’s value, however. These approaches to business valuation are applicable whether your business is located in New Castle or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Looking at Assets
There are several asset-based approaches possible for business valuation. 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 difference between the assets and the liabilities of the company is the business’ value.
Of course, this approach is deceptively simple. 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.
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. In the other approach, a liquidation asset-based approach, the accountant first imagines that all the assets and liabilities were paid off, as though the business was liquidated. The net cash received from such a liquidation is the business’ value.
The specifics of your business may reveal whether this sort of approach is right for you. 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, however, could find value in an assessment that is asset-based, as its assets are owned by the entire company and not one person.
Determining Value Based on the Market
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 New Castle. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. An accountant using this approach will try to determine the fair market value of your business and what a buyer is likely to pay for it in the current climate.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. Non-competition clauses and private information can hinder this approach, making it difficult or potentially even impossible to get the information necessary for this type of valuation.
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.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. However, they can use hard data to back up this prediction. 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.
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. There are other value assessments that serve difficult purposes. Someone with a patent, for example, may also seek a valuation of their property.
What is a 409A Valuation?
A 409A valuation looks at stock as it relates to the value of your business. It is common for employees in many fields to receive stocks as compensation. 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.
It’s not as confusing as it seems. 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. 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.
It is important to know whether or not your business is legally required to get this form of valuation. 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. Experience and expertise are key benefits that only an accountant can offer if you have to work through a 409A valuation.
Valuations for Businesses
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. Perhaps you are interested in finding the likely selling price of your business on the market. 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. 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.
It takes an experienced team to understand the intricacies of business and finance, as well as IRS regulations. A valuation is an added complexity on top of keeping your business running, so allow our accountants to handle valuations for you.
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. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. 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. It is sometimes complicated to find the value of these intangible assets. Yet for many businesses, understanding those assets and their precise worth can add value and keep the company in compliance with all applicable laws.
Assessing Purchase Price Allocations for Business
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.
This type of business valuation looks at all the different parts of a business to determine its 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?
At Redwood Valuation Partners, we are experts in business valuation. Ensure that your New Castle business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Often, you will need to know the fair market value of 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. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. 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. 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. 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.
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 the obvious, our valuations include customized reports, audit defense and free consultations. 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. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
The bottom line is that a business valuation, for any reason, is best approached with help. 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.
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 New Castle, PA.
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 New Castle
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