Assessing Business Value in Ralston
Do you know how much your Ralston 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. 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 Ralston business. If this sounds technical, don’t worry. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.
409A Valuation in Ralston, IA plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Top Reasons to Seek a Business Valuation
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. 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.
In addition to how much a business is worth, a valuation can show which parts of a business are valuable. There are as many factors involved in the value of a business as there are businesses themselves. A local business that is important to the community in Ralston 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.
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. If you are interested in stock compensation, expenses or selling price, you will see a lot of benefits from a well-done business valuation. 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
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 methods apply to an array of businesses, whether they’re in Ralston or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
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. 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. 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.
The first option is a going concern asset-based approach. Simply put, the accountant can subtract the value of any liabilities from the assets that the business has. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. After a real liquidation, the business would receive cash; this now becomes the business’s value in a valuation.
The type of asset-based approach you choose depends on your business. 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. 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.
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 Ralston. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
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
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.
Obviously, this invites an element of risk in that the accountant or valuator is attempting to determine value based on a predication. Some of this uncertainty is offset by the ability to use concrete data to calculate this valuation. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. The market itself can produce spikes and dips that require an additional capitalization factor to be figured into the assessment.
How a business is run and who owns it is an important consideration here, as with other approaches to valuation. 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.
What Kinds of Valuations Exist?
A valuation has benefits beyond just figuring out what a business is worth and there is therefore a lot of variety in types of valuations. 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. 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. 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. 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. 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. Experience and expertise are key benefits that only an accountant can offer if you have to work through a 409A valuation.
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. Perhaps you want to ensure compliance with tax reporting or, conversely, find the fair market value of your business.
The intimate details of IRS regulations, business and finance can be a complex maze to try to sort through. You know your business, but evaluating your business against all applicable laws, regulations and financial considerations takes an expert in the field of business valuation.
How to Assess IP and Patents
Intellectual property and patents have separate valuation concerns. However, this type of valuation can impact a wide range of businesses. 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. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
What is a Purchase Price Allocation?
Purchase price allocations, or ASC 805, may be necessary for your business. 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. 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.
The Last Word on Business Valuations
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether your business is in Ralston 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.
Fair market value is a crucial piece of information you should have about 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. Don’t get overwhelmed by the details. That’s where experienced accountants come in to help inform and guide you. Whether it’s finance, tax issues or business, our accountants are prepared to navigate the technicalities with you.
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 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 will even help you get started if you aren’t sure. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
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. Find out how to get started with a 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 Ralston, IA.
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 Ralston
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