Assessing Business Value in Pavilion

Have you ever wondered how much your business is actually worth? There are a number of intricate details that you have to evaluate in order to find your business’ fair market value. 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. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.

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

Top Reasons to Seek a Business Valuation

If you want to know exactly how much your business may be worth if you sold it, you should seek a business valuation. 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 business that is important for a particular city, such as Pavilion, may have high value there, but not elsewhere. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. The particulars of a business will determine the outcome.

Therefore, getting experienced accountants to do a valuation is critical. 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. Ultimately, the reason for a business valuation depends on your particular circumstances. A free consultation from Redwood may help you clarify the reasons for your valuation and the best approach for your particular business.

Approaches 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 approaches to business valuation are applicable whether your business is located in Pavilion or not. The best approach for your business depends on your reason for getting a valuation and your long-term goals for your company.

Asset-Based Approach

Finding the value of a business based on its assets isn’t as straightforward as it sounds. 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. 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.

Don’t be fooled by how simple this approach seems at first glance. In practice, determining which assets and liabilities to include, and how, is a tricky process. Additionally, there are two different ways of going about this process: a going concern asset-based approach and 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 a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. 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. 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.

Determining Value Based on the Market

A market-based approach looks at the market as a whole and not solely at your business. For example, you could compare your business to others located in Pavilion. The goal is to see what your business would be worth by comparing it to other similar businesses.

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.

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.

Looking at Income or Earnings

An income- or earning-based approach is different from the other two in that it is concerned with future potential. 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. There is, however, reliable data to back up the value assessment made through this method. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. Additionally, capitalization factors may indicate abnormalities in the market itself that should be considered during a valuation.

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.

Different Kinds of Business Valuations

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. Someone with a patent, for example, may also seek a valuation of their property.

What is a 409A Valuation?

This type of valuation is concerned with the stocks connected to your business. Many businesses offer stock to their employees and contractors. Stocks given to employees are regarded by the IRS as deferred income �” income given to someone in one year but actually paid in a different year.

This may seem overwhelming. 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. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.

Sometimes it is a matter of compliance with the law to get a 409A valuation for 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. 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

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. As our clients have expanded, so has Redwood, increasing the size and expertise of our team. We have experienced accountants prepared for whatever your business’ specific valuation needs entail. 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. 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

Intellectual property and patents have separate valuation concerns. Most businesses do have some sort of intangible property that want to protect and valuate, though. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. 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. 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

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. 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.

Getting a Business Valuation Done Right

At Redwood Valuation Partners, we are experts in business valuation. Whether your business is in Pavilion 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.

Often, you will need to know the fair market value of 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. 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.

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 know the pressures and stress of running a successful business. We let you get to the important work of running your business while we take care of the intricacies of business valuation.

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.

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.

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 Pavilion, NY.

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.

Pavilion New York business valuation services

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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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