How to Find the Value of Your Pound Ridge, New York Business
Do you know how much your Pound Ridge business is worth? Assessing the value of your Pound Ridge 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 Pound Ridge business. 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, IRC 409A Valuation, Purchase Price Allocation in Pound Ridge, NY
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Do Businesses Get Valuations?
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. 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 shows not just overall worth, but also where that value originates from. 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 Pound Ridge may have a high value for that particular community, but not for a potential buyer. 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. 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
When assessing the value of any business, there are three broad approaches that are considered standard. While there may be other approaches, these three encompass the main methods of assessing a business’ value. These approaches to business valuation are applicable whether your business is located in Pound Ridge 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
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. 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 exercise can reveal a lot of information about a business, including its liabilities and assets. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
Of course, this approach is deceptively simple. In practice, determining which assets and liabilities to include, and how, is a tricky process. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.
A going concern asset-based approach is a little more straightforward. Value here is determined based on the value of the assets the accountant finds in the business contrasted with the cost of any liabilities. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. 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. 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. 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 Pound Ridge could provide insight on your own. 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.
Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. Some of the difficulty with a market focused approach arises when you encounter non-competition clauses and other information a business has decided to make private.
Income- or Earning-Based Approach
The difference between an income or earnings focused approach and other approaches is that this means of valuation is concerned with the future. 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. However, they can use hard data to back up this prediction. The accountant doing the valuation can even “normalize” figures to remove unusual spikes or dips that could make the assessment less precise. 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.
What Kinds of Valuations Exist?
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?
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.
It’s not as confusing as it seems. 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.
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.
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.
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. 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.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. 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. Perhaps you want to ensure compliance with tax reporting or, conversely, find the fair market value of your business.
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
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. But you might also seek an IP and patent valuation in order to plan, secure a merger or acquisition, or during litigation.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. Defining assets that are not necessarily tangible can be complex, though. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
Purchase Price Allocations (ASC 805)
Purchase price allocations, or ASC 805, may be necessary for your business. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. This is particularly important for assessing purchase prices in an acquisition.
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?
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether you are comparing your business to others in Pound Ridge 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.
Fair market value is a crucial piece of information you should have about 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. You also could seek a business valuation in order to protect a patent. 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.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. 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. That’s why we won’t waste your time; we’ll handle the details while you keep running your business.
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. If you aren’t sure where to start, we can guide you through the process right from the start. And our customized reports will include all the detail you need to make business decisions based on your valuation. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.
In the end, if you need a business valuation, you will likely need help with that valuation. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. 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 Pound Ridge, NY.
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 Pound Ridge
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