How are New Market, AL Businesses Valued?
Have you ever assessed the value of your New Market business? There are a number of intricate details that you have to evaluate in order to find your business’ fair market value. 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 New Market business. This might seem complicated, but we can help. 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 Business Valuation Services in New Market
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Why Do Businesses Get Valuations?
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. 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 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. It might be surprising to learn that a business with a very high value in New Market is perhaps not as highly valued in a different city. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. It comes down to the details.
That’s why expertise is crucial in a business valuation. In addition to understanding your business, an accountant doing a valuation should know the ins and outs of finance, venture capital, tax law and other fields. 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.
What Approaches Are There to Business Valuation?
There are three main approaches to business valuation that an accountant or business valuator will use. 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 New Market or elsewhere. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.
Looking at Assets
There are several asset-based approaches possible for business valuation. In this approach, a business’s investments are added up to determine value. An accountant going forward with an asset-based mindset is theoretically attempting to imagine what it would cost to set up another, identical business. This reveals what that original business is worth (what kinds of assets it has) and what liabilities it has. The next step involves balancing the assets and liabilities in order to calculate how much value the business holds.
Of course, this approach is deceptively simple. This process gains complexity when the accountant has to decide which assets to include. A going concern asset-based approach or a liquidation asset-based approach will help you move forward with this appraisal.
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. 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. 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.
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 Market. 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. 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. 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.
Looking at Income or Earnings
This approach to business valuation looks at potential and future value in order to draw conclusions. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
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. 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. 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. Sole proprietorship could mean that a business’s identity is so closely linked to its owner that selling it incurs particular risks that can not be predicted based on earnings alone.
Different Kinds of Business 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. Others focus on things such as patents and intellectual property.
Getting a 409A Valuation
This type of valuation is concerned with the stocks connected to your business. 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. 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. 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.
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. A Redwood valuator will know the ins and outs of this type of valuation, as well as the best approach for you and your business as you undergo this process.
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.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. Redwood’s expert team has grown to keep pace with our increasing client needs. We have experienced accountants prepared for whatever your business’ specific valuation needs entail. Business valuation could include tax or financial reporting, assessment of fair market value or for purchase price allocations.
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.
How to Assess 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. 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. Defining assets that are not necessarily tangible can be complex, though. But the value of IP and patents cannot be understated, especially in recent times when so much of a business’s value comes from these assets in particular.
What is a Purchase Price Allocation?
Another requirement businesses encounter is ASC 805. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. 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. 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 Market 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. This may be because you intend to sell your company or because you want to stay in compliance with 409A. You also could seek a business valuation in order to protect a patent. Assets and liabilities are complicated. 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. 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. 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. We can assist you from the very beginning if you don’t know where to start. 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. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
In the end, if you need a business valuation, you will likely need help with that valuation. Get Redwood’s experienced team to assist you as you work through a business valuation for any reason. 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 New Market, AL.
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 Market
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