How to Find the Value of Your Whiteland, Indiana Business
Have you ever wondered how much your business is actually worth? Assessing the value of your Whiteland 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 Whiteland business. If this sounds technical, don’t worry. 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 Whiteland, IN 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
If you want to know exactly how much your business may be worth if you sold it, you should seek a business valuation. If you are considering selling your business, it’s critical to get a valuation first so that you can go into negotiations with potential buyers armed with knowledge and data.
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. A local business that is important to the community in Whiteland may have a high value for that particular community, but not for a potential buyer. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. 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. But the reasons and advantages of a valuation are different for every circumstance. 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
There are three main approaches to business valuation that an accountant or business valuator will use. 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 Whiteland or not. The right approach for you depends on you, your business and what you hope to get out of a valuation.
There are several asset-based approaches possible for business valuation. 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. The difficulty lies in the details, where figuring out the worth of a business and sorting through assets and liabilities becomes more complicated. Typically, one of two methods will be chosen for proceeding: either a going concern asset-based approach or a liquidation asset-based approach.
One method is to look at assets with a going concern. Value here is determined based on the value of the assets the accountant finds in the business contrasted with the cost of any liabilities. A liquidation approach to determining worth is concerned with paying off liabilities before figuring out the value of a business. After liquidation, the accountant can see clearly the value of the business.
The type of asset-based approach you choose depends on your business. There are other approaches if focusing on assets is not right for your situation and goals. 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
Sometimes it is important to take in the whole picture, meaning the entire market, and not just your one business. For example, you could compare your business to others located in Whiteland. A method that uses comparison to determine value take into account other factors impacting the market as a whole.
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. 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.
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. Private and protected information such as non-competition clauses can prove a barrier to obtaining some of the information needed to make a valuation.
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.
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. Some of this uncertainty is offset by the ability to use concrete data to calculate this valuation. 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. Sole proprietorship could mean that a business’s identity is so closely linked to its owner that selling it incurs particular risks that can not be predicted based on earnings alone.
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.
What is a 409A Valuation?
This type of valuation is concerned with the stocks connected to your business. Many businesses offer stock to their employees and contractors. When compensation comes in the form of stocks like this it is considered a special type of deferred payment that has to be reported.
It’s not as confusing as it seems. 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. Fair market value is especially important here because employees with stock need to be able to sell it at or above that mark. 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. 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. You may be hoping to see how much you could make by selling your company. Or you might be hoping to assess your tax liability by looking at your business’ value.
A practiced accountant can help navigate enterprise and equity valuations for businesses. 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. Whether you want to find your fair market value or do tax or financial reporting on your business, we are prepared to help you through the process.
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
Intellectual property and patents have separate valuation concerns. However, this type of valuation can impact a wide range of businesses. Some of our clients have concerns about trademarks and trade secrets, while others want to make sure they stay in compliance with taxes. 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. Defining assets that are not necessarily tangible can be complex, though. 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.
Purchase Price Allocations (ASC 805)
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. Purchase price is the crucial outcome of such an evaluation of a business.
A purchase price allocation ultimately comes down to determining what various parts of a purchased business are worth, including assets and liabilities. 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. Ensure that your Whiteland 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. Whether you are looking to assess your value for the sake of selling or have yearly tax considerations, a business valuation will help. Intellectual property can be assessed and protected through a business valuation. The intricacies can seem overwhelming. 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.
One of our core values is teamwork, which we believe can help even in the complex world of venture capital and auditing. Our valuation associates and analysts have worked in their field for years, becoming respected experts. Many of the people we work with come from high-pressure environments with tough 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. 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. See both subjective and objective elements of your valuation with an in-depth look at your 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.
In the end, if you need a business valuation, you will likely need help with that valuation. 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 Whiteland, 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 Whiteland
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