Assessing Business Value in Rosendale
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. Our experts at Redwood Valuation Partners have years of experience in business valuation and are eager to help you through the process from start to finish.
409A Valuation, IRC 409A Valuation, Purchase Price Allocation in Rosendale, WI
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Rosendale 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.
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. It might be surprising to learn that a business with a very high value in Rosendale is perhaps not as highly valued in a different city. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. The particulars of a business will determine the outcome.
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. A free consultation from Redwood may help you clarify the reasons for your valuation and the best approach for your particular business.
Different Ways of Approaching Business Valuation
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. 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 Rosendale or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
While it may sound obvious, there are actually a few approaches to looking at a business’s assets In this approach, a business’s investments are added up to determine value. The business valuator tries to determine with this method what it would cost to set up anther business exactly like the one that already exists. 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.
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. 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. The accountant looks at the company’s net balance sheet to find the value of its assets and then deducts the value of its 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. Asset-based approaches are not appropriate for all business. There are certainly some businesses, such as those that are in a sole proprietorship, that would be well-advised to take a different 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. This includes looking at other businesses in Rosendale. The goal is to see what your business would be worth by comparing it to other similar businesses.
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. 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.
Looking at Income or Earnings
This approach to business valuation looks at potential and future value in order to draw conclusions. An income-based approach tries to use current income and earnings to predict how much a business will be worth in the future.
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. However, they can use hard data to back up this prediction. Often, a valuator will “normalize” current earnings, removing abnormal costs and windfalls, to try to get a reliable set of figures to work with. Sometimes, these predictions are divided by capitalization factors that fluctuate based on the market.
How a business is run and who owns it is an important consideration here, as with other approaches to valuation. If a business is strongly linked with its owner and that owner sells or leaves the business, an evaluation based on past performance could lose its validity depending on how customers react to the change.
Types of Valuations
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. 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.
A 409A valuation looks at stock as it relates to the value of 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 sounds complicated. 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. In addition to stock, a 409A valuation is required if your company issues bonus plans, salary deferral arrangements and other agreements involving deferred compensation for employees.
Often, you will know you need this type of valuation because it will be legally required of your business. Additional 409A valuations could be required at the end of a new round of funding or once a year, even if you have gotten this type of valuation in the past already.
It is advised that you don’t try to do a 409A valuation yourself, even though you can, and instead let an accountant deal with unforeseen difficulties that you aren’t prepared to handle. 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
Some of the reasons for a business valuation include things such as entity discussions and business negotiations, but they are also useful while planning a business or estate. 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.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. Redwood’s expert team has grown to keep pace with our increasing client needs. 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.
IRS regulations, business needs and finance are complex fields that call for knowledge and specialization. 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
Intellectual property and patents have separate valuation concerns. 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. But you might also seek an IP and patent valuation in order to plan, secure a merger or acquisition, or during litigation.
Make sure your patent or intellectual property is protected by understanding what it’s worth on the market. 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. During a purchase or acquisition, businesses seek to find their fair market value, including their intangible assets and liabilities, to bring to the transaction. Of course, the overall goal is to figure out the purchase price for an acquisition.
This type of business valuation looks at all the different parts of a business to determine its 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.
What’s the Bottom Line?
Come to Redwood Valuation Partners when the time comes for your business valuation. Ensure that your Rosendale business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Knowing the fair market value of your business can help your future. This may be because you intend to sell your company or because you want to stay in compliance with 409A. Maybe you are seeking a business valuation for tax reasons or to assess the value of a patent. Don’t get overwhelmed by the details. 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 value your time; let us minimize the burden of complicated valuation details while you focus on what you know best ” your business.
Our principles when working with clients include intense focus, long experience and grounded expertise, no matter the cause for the valuation. Along with audit defense, we will give you a free consultation before beginning your valuation, which comes with customized report. We can assist you from the very beginning if you don’t know where to start. Take a deeper look at your business with the customized report we provide as part of our valuations. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. And if an audit should come up, you can rest easy knowing our audit defense has your back at any time.
If you do want to find the value of your business or assets, having skilled assistance can be a boon. 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 Rosendale, WI.
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 Rosendale
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