How to Find the Value of Your Stanford, Indiana Business
Have you ever assessed the value of your Stanford business? Assessing the value of your Stanford 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 Stanford 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, IRC 409A Valuation, Purchase Price Allocation in Stanford, IN
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
Why Get Your Stanford 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. 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 Stanford 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. It comes down to the details.
Therefore, getting experienced accountants to do a valuation is critical. 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. The advantages of doing a business valuation correctly include understanding your selling price and stock compensation. 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
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. 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 Stanford or elsewhere. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
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. 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. Assets and liabilities are much easier to see through this theoretical new business. 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. This process gains complexity when the accountant has to decide which assets to include. A going concern asset-based approach or a liquidation asset-based approach will help you move forward with this appraisal.
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.
Choosing an asset focused method of business valuation maybe right for your business. It is possible that a different method is more suitable for your particular 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 Stanford. Viewing your business side-by-side with other, similar ventures can provide crucial information for figuring out the value of a business.
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. 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.
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.
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. 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.
There are, as with other methods, additional considerations here, such as the type of business you run. 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
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. A business valuation is not the only type of assessment that is possible. A different reason for a valuation could include something such as intellectual property.
Getting a 409A Valuation
A 409A valuation looks at stock as it relates to the value of your business. It is common for employees in many fields to receive stocks as compensation. When compensation comes in the form of stocks like this it is considered a special type of deferred payment that has to be reported.
This sounds complicated. What it comes down to is stock options. Businesses who need this form of valuation need it in order to determine the fair market value of their business. 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. Other deferred compensation that requires a 409A valuation includes salary deferral arrangements and bonus plans the company issues.
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.
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. They can also help you choose the best approach to this valuation for your circumstances and business needs.
Valuations for Businesses
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 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.
IRS regulations, business needs and finance are complex fields that call for knowledge and specialization. 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
Finding the value of intellectual property and patents is a specialized field. Most businesses do have some sort of intangible property that want to protect and valuate, though. 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.
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. 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.
Assessing Purchase Price Allocations for Business
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. 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?
At Redwood Valuation Partners, we are experts in business valuation. Ensure that your Stanford business meets the requirements of the tax code and applicable regulations while finding the value of the assets, liabilities and intellectual property you hold.
Often, you will need to know the fair market value of your business. This may be because you intend to sell your company or because you want to stay in compliance with 409A. Intellectual property can be assessed and protected through a business valuation. 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 know the pressures and stress of running a successful business. 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. We can assist you from the very beginning if you don’t know where to start. The customized reports we include with our valuations give you insight into the details of all of your businesses assets. The comprehensive valuation report will include subjective and objective factors relevant to your particular business. Plus, you can take one less burden off your plate with audit defense that guarantees audit defense at any time without high additional costs.
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. A free consultation may be the perfect starting point.
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 Stanford, IN.
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 Stanford
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