How are Tupelo, MS Businesses Valued?
Do you know how much your Tupelo 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 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. At Redwood Valuation, we built our foundation on years of experience that we leverage to assist our customers seeking business valuations.
409A Valuation in Tupelo, MS 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. 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.
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 business that is important for a particular city, such as Tupelo, may have high value there, but not elsewhere. In contrast, a business that seems modest and small may actually hold a lot of value for a buyer. 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. 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. If you need help determining if a business valuation is right for your circumstances, get a free consultation from Redwood.
What Approaches Are There to Business Valuation?
An accounting doing a business valuation will likely take one of three main approaches to assessing the value of a business. These three approaches are not the only possible ways of looking at a business’s value, however. These approaches to business valuation are applicable whether your business is located in Tupelo or not. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
While it may sound obvious, there are actually a few approaches to looking at a business’s assets The overall goal is to add together all the investments in the 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. This exercise can reveal a lot of information about a business, including its liabilities and assets. The difference between the assets and the liabilities of the company is the business’ value.
It sounds straightforward, but there are hidden complexities. 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.
A going concern asset-based approach is a little more straightforward. Simply put, the accountant can subtract the value of any liabilities from the assets that the business has. In a liquidiation focused approach to valuation, it is important to imagine the business is liquidated before determining its value. After a real liquidation, the business would receive cash; this now becomes the business’s value in a valuation.
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. For example, a sole proprietorship in which assets are in the name of the business’ owner are not good candidates for 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.
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 Tupelo. Viewing your business side-by-side with other, similar ventures can provide crucial information for figuring out the value of a business.
The advantage to this approach is that it looks more comprehensively at the overall business climate for your particular field. 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. 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.
Income- or Earning-Based Approach
An income- or earning-based approach is different from the other two in that it is concerned with future potential. However, this method starts in the present, looking at the earnings of the business today to try to predict its future earnings.
Of course, assessing value this way comes along with the risk of assumptions and predictions that invite uncertainty. 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. The market itself can produce spikes and dips that require an additional capitalization factor to be figured into the assessment.
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. Business valuations are just one type of valuation that is possible. Others focus on things such as patents and intellectual property.
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. The fair market value determined by this valuation is a benchmark at or above which employees given stock must be able to sell. If your company issues other forms of deferred compensation, including things like bonus plans, then this type of valuation may be required by law.
Often, you will know you need this type of valuation because it will be legally required of your business. Even if you have gotten a 409A valuation in the past for your business, the law could require that you get another one each year or every time a new round of funding closes.
An accountant such as the ones at Redwood can be a crucial ally in trying to sort through the 409A valuation process any time you find you need to do one. 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. Perhaps you are interested in finding the likely selling price of your business on the market. Others desire a business valuation when researching things such as tax liability.
Whatever the reason, a skilled valuator can help you get equity and enterprise valuations. 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. 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. However, this type of valuation can impact a wide range of businesses. Taxes are complex when it comes to IP and patents, but it is also important to make sure trade secrets and trademarks can be protected. Litigation, mergers, acquisitions and business planning provide additional cause for an IP and patent valuation.
Don’t neglect to protect your valuable intellectual property or patent by getting a valuation of it. It is sometimes complicated to find the value of these intangible assets. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
Assessing Purchase Price Allocations for Business
Purchase price allocations, or ASC 805, may be necessary for your business. In the course of negotiations for a business acquisition, things such as liabilities, assets and fair market value need to be assessed objectively. 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. 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 Tupelo 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.
Often, you will need to know the fair market value of your business. Business valuations help in situations where you want to sell, sort out your taxes or simply determine the value of your various assets. 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. 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. 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. That’s why we won’t waste your time; we’ll handle the details while you keep running your business.
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. 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. Get a deeper look at your business that includes objective factors as well as subjective ones during the assessment. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.
The bottom line is that a business valuation, for any reason, is best approached with help. 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 Tupelo, MS.
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 Tupelo
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