How are Pigeon, MI Businesses Valued?
Have you ever assessed the value of your Pigeon business? 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. The value of a business might change depending on who you ask, but luckily there are certain consistent principles applied to any business valuation that is performed. This might seem complicated, but we can help. 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 Pigeon, MI plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Pigeon Business Valued?
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.
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. A local business that is important to the community in Pigeon may have a high value for that particular community, but not for a potential buyer. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. It comes down to the details.
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. But the reasons and advantages of a valuation are different for every circumstance. 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. 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 Pigeon or not. 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
There are several asset-based approaches possible for business valuation. 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. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. 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 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.
The specifics of your business may reveal whether this sort of approach is right for you. Asset-based approaches are not appropriate for all business. 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
It can be useful in a valuation to look at the bigger picture and see what a business is worth compared to the rest of the market. The value of other businesses in Pigeon could provide insight on your own. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
The advantage to this approach is that it looks more comprehensively at the overall business climate for your particular field. 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.
It would be great if the sort of information necessary for this approach was easy to obtain, but it is not always the case that competing businesses will divulge the necessary figures. 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
The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. By looking at the income of the business in the present day, it is possible to make a strong prediction about future value.
It is not an exact science to predict the future of a business and therefore an earning focused approach can invite an element of risk. 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.
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. There are other value assessments that serve difficult purposes. Someone with a patent, for example, may also seek a valuation of their property.
Getting a 409A Valuation
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. Stocks are frequently given to employees and contractors as part of their earnings from working. 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. What it comes down to is stock options. For one thing, this type of valuation can help a business find its fair market value. Any employee offered stock as part of their compensation must be able to buy equity in your company at or above the fair market value determined through this valuation. 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. They can also help you choose the best approach to this valuation for your circumstances and business needs.
Valuations for Businesses
Whether you’re negotiating a transaction, planning your business or estate, or involved in entity conversations, business valuations cover a wide range of situations and companies. 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 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.
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
Finding the value of intellectual property and patents is a specialized field. However, this type of valuation can impact a wide range of businesses. Taxes are complex when it comes to IP and patents, but it is also important to make sure trade secrets and trademarks can be protected. 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.
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.
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.
The Last Word on Business Valuations
Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Whether you are comparing your business to others in Pigeon or looking elsewhere, a business valuation can show you the fair market value of your business and assets and keep you in compliance with any tax code 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. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. The intricacies can seem overwhelming. 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.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. Our valuation associates and analysts have worked in their field for years, becoming respected experts. We understand that many of our clients come from high-pressure startups and growth-focused companies with tight deadlines. We let you get to the important work of running your business while we take care of the intricacies of business valuation.
Whatever your reason for getting a business valuation, we can offer client focus, experience and expertise that can make the process as easy as possible for you. Along with the obvious, our valuations include customized reports, audit defense and free consultations. 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. 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 Pigeon, MI.