Assessing Business Value in Richton
Do you know how much your Richton business is worth? 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 Richton 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 in Richton, MS plus IRC 409A Valuation, and Purchase Price Allocation
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Richton Business Valued?
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 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 Richton 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 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. But the benefits of a business valuation come in many forms, from stock compensation to expenses to selling prices. However, any advantages of doing a valuation are up to you and your business. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.
Approaches to Business Valuation
When assessing the value of any business, there are three broad approaches that are considered standard. 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 Richton or elsewhere. The right approach for you depends on you, your business and what you hope to get out of a valuation.
Finding the value of a business based on its assets isn’t as straightforward as it sounds. The aim of an asset-based approach is to total the investments of a business. 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. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.
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. Additionally, there are two different ways of going about this process: a going concern asset-based approach and a liquidation asset-based approach.
The first option is a going concern asset-based approach. 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 type of asset-based approach you choose depends on your business. It is possible that a different method is more suitable for your particular 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.
Looking at 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 Richton. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
This approach has the benefit of viewing overall market conditions rather than having a more narrow focus. An accountant using this approach will try to determine the fair market value of your business and what a buyer is likely to pay for it in the current climate.
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. 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.
Making a Valuation Based on 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. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
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.
Types of 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. Others focus on things such as patents and intellectual property.
What is 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. 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. What it comes down to is stock options. 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. 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
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. Others desire a business valuation when researching things such as tax liability.
A practiced accountant can help navigate enterprise and equity valuations for businesses. At Redwood, we’ve seen our clients’ needs expand as our own business has expanded. We years of experience and a comprehensive team, we are prepared to take on a host of business valuations needs. 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. 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. 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. Litigation, mergers, acquisitions and business planning provide additional cause for an IP and patent valuation.
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. 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?
You may be required to do a purchase price allocation. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. 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
Come to Redwood Valuation Partners when the time comes for your business valuation. Whether you are comparing your business to others in Richton 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.
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. 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. We know how to assist you with a business valuation whether it is for tax issues, value assessment or any other reason.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. 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 let you get to the important work of running your business while we take care of the intricacies of business valuation.
Whether you want a valuation for selling, taxes or any other reason, we can promise client focus and years of experience when working alongside 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. 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. Get Redwood’s experienced team to assist you as you work through a business valuation for any reason. 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 Richton, MS.