Business Valuation Chicago
Business Valuation Chicago
Chicago’s economy is very diverse making it a perfect candidate as a startup hub. Chicago is home to many of Fortune 500 companies in various industries ranging from manufacturing to insurance, finance, retail, publishing, and food processing. This well-established business community has proved a healthy customer base for an accompanying business-to-business (B2B) tech ecosystem of startups working hard to address some of the challenges these industries face.
Chicago-based Redwood Valuation has years of venture capital and startup valuation experience. We believe that our unique experience will provide the dynamic Boston community with a valuable resource uncommon in the region. We are proud to be part of the Chicago community and look forward to being a leading Chicago business valuation company for years to come.
Call Redwood Valuation Partners for your next business valuation (206) 660-1295
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 you time, and allow you to focus on what matters – growing your business. Get a quality company appraisal in Chicago.
The Redwood team has performed many IRC 409A Valuation Chicago engagements, and we offer a wide variety of business appraisals to Chicago. 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.
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. Anyone hoping to sell a business will be better positioned during negotiations if they have gotten a thorough business valuation before any talks began.
In addition to how much a business is worth, a valuation can show which parts of a business are valuable. The value of any one business could come from entirely different sources than a different business. It might be surprising to learn that a business with a very high value in Chicago is perhaps not as highly valued in a different city. Likewise, a business that seems like a tiny startup could have a ton of hidden value for the right buyer. The particulars of a business will determine the outcome.
It’s imperative, then, that your business valuation is handled by professionals. An accountant doing a valuation needs to know tax law, the audit process and finance, as well as information about your business. If you are interested in stock compensation, expenses or selling price, you will see a lot of benefits from a well-done business valuation. Ultimately, the reason for a business valuation depends on your particular circumstances. 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?
There are three main approaches to business valuation that an accountant or business valuator will use. 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 Chicago or not. Each business has its own particulars that will ultimately determine the approach that is the most appropriate for it.
Asset-Based Approach
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. 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. The next step involves balancing the assets and liabilities in order to calculate how much value the business holds.
Of course, this approach is deceptively simple. In practice, determining which assets and liabilities to include, and how, is a tricky process. Additionally, there are two different ways of going about this process: a going concern asset-based approach and a liquidation asset-based approach.
One method is to look at assets with a going concern. 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. 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 specifics of your business may reveal whether this sort of approach is right for you. 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 is not good candidate 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. For example, you could compare your business to others located in Chicago. 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. In this approach, it is also very important to consider what a buyer in the market would currently pay for your business and what the fair market value would be.
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.
Looking at Income or Earnings
This approach to business valuation looks at potential and future value in order to draw conclusions. 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. 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. 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
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.
409A Valuations
A 409A valuation is conducted for the purpose of evaluating the stocks associated with the company. It is common for employees in many fields to receive stocks as compensation. 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.
This may seem overwhelming. Ultimately, it is a matter of reporting stock earnings. For one thing, this type of valuation can help a business find its fair market value. 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. 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. 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.
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. 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
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. 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.
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 getting a valuation done.
How to Assess IP and Patents
Intellectual property and patents have separate valuation concerns. Most businesses do have some sort of intangible property that want to protect and value, though. 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. Other reasons for IP and patent valuations include business planning, mergers and acquisitions, and litigation support.
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. Despite the difficulty, IP and patents are extremely valuable assets that every business should seek to protect as well as they can.
What is a Purchase Price Allocation?
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. The purchase price is the crucial outcome of such an evaluation of a business.
The goal of a purchase price allocation is to tease apart the pieces of a business, such as liabilities and assets, to find its fair market value. It is not always the case that a business is sold as one whole entity; it may be sold in smaller pieces.
Getting a Business Valuation Done Right
Here at Redwood Valuation Partners, you will find the expertise you need for your valuation. Whether your business is in Chicago 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.
Fair market value is a crucial piece of information you should have about 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. Intellectual property can be assessed and protected through a business valuation. Don’t get overwhelmed by the details. That’s where experienced accountants come in to help inform and guide you. Whether it’s finance, tax issues, or business, our accountants are prepared to navigate the technicalities with you.
We understand the ins and outs of venture capital and auditing and take a teamwork-focused approach. Our team consists of experts who have worked in their specialties for years. 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.
Our principles when working with clients include intense focus, long experience, and grounded expertise, no matter the cause for the valuation. We go beyond the standard valuation to offer a free consultation, as well as audit defense and customized reports. 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 business’s assets. See both subjective and objective elements of your valuation with an in-depth look at your business. Finally, you will have nothing to fear from audits, as our audit defense is prepared to protect you should the occasion arise.
In the end, if you need a business valuation, you will likely need help with that valuation. Don’t try to tackle this task alone when Redwood is ready and able to help you with the process. A free consultation may be the perfect starting point.
409A Valuation Chicago
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
