How are San Carlos, AZ Businesses Valued?

Have you ever wondered how much your business is actually 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 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, IRC 409A Valuation, Purchase Price Allocation in San Carlos, AZ

Call Redwood Valuation Partners for your next business valuation (206) 660-1295

Why Do Businesses Get Valuations?

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. Anyone hoping to sell a business will be better positioned during negotiations if they have gotten a thorough business valuation before any talks began.

A business valuation shows not just overall worth, but also where that value originates from. Teasing out all the reasons a business is valuable is complicated, though. A business that is important for a particular city, such as San Carlos, may have high value there, but not elsewhere. 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.

Therefore, getting experienced accountants to do a valuation is critical. Getting your business valued requires knowledge of finance, tax law, venture capital and the audit process, as well as of your business. The advantages of doing a business valuation correctly include understanding your selling price and stock compensation. But the reasons and advantages of a valuation are different for every circumstance. We at Redwood offer a free consultation for clients who need advice getting started with a business valuation.

Different Ways of Approaching 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 methods apply to an array of businesses, whether they’re in San Carlos or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.

Determining Value Based on Assets

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. An accountant going forward with an asset-based mindset is theoretically attempting to imagine what it would cost to set up another, identical business. Assets and liabilities are much easier to see through this theoretical new business. Then, the valuator can simply subtract the liabilities from the assets to figure out the worth of the business.

It sounds straightforward, but there are hidden complexities. 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. In the other approach, a liquidation asset-based approach, the accountant first imagines that all the assets and liabilities were paid off, as though the business was liquidated. 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. 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.

Looking at 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. For example, you could compare your business to others located in San Carlos. Viewing your business side-by-side with other, similar ventures can provide crucial information for figuring out the value of a business.

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.

Unfortunately, it is not always easy to get competitors with your business to reveal the sort of information needed for a market-based valuation. 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

An income- or earning-based approach is different from the other two in that it is concerned with future potential. 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. The accountant doing the valuation can even “normalize” figures to remove unusual spikes or dips that could make the assessment less precise. 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. 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. 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. 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. For one thing, this type of valuation can help a business find its fair market value. Fair market value is especially important here because employees with stock need to be able to sell it at or above that mark. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.

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.

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.

Valuations for Businesses

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. 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. Redwood’s expert team has grown to keep pace with our increasing client needs. Regardless of your specific reasons for seeking out a business valuation, we can work with you to reach your goals. 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. 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. 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. 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. 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)

You may be required to do a purchase price allocation. 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. It is not always the case that a business is sold as one whole entity; it may be sold in smaller pieces.

What’s the Bottom Line?

Here at Redwood Valuation Partners you will find the expertise you need for your valuation. Whether you are comparing your business to others in San Carlos 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. 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. Assets and liabilities are complicated. A helping hand through the process of business valuation can make the process easier. We know how to assist you with a business valuation whether it is for tax issues, value assessment or any other reason.

While venture capital and auditing can be complicated, we believe teamwork and expertise can help manage the process of a valuation. At Redwood, we have built a team grounded in years of expertise and business knowledge. We know the pressures and stress of running a successful business. We value your time; let us minimize the burden of complicated valuation details while you focus on what you know best �” your business.

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. We go beyond the standard valuation to offer a free consultation, as well as audit defense and customized reports. We will even help you get started if you aren’t sure. 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. 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. 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.

Client-Focus

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 San Carlos, AZ.

Services

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.

Experience

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.

Contact Us

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.

San Carlos Arizona business valuation services

409A Valuation San Carlos

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

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