What factors exactly go into 409A valuation cost? We get this question a lot and if you also need an answer to it, the valuation experts at Eton Venture Services have provided this guide to help you.
One key factor worth considering when it comes to getting a 409A valuation is “how to choose a suitable 409A valuation consultant“? This type of valuation involves a lot of complex processes. As such, for you to achieve the best results, you need to work with a qualified person, who has enough experience and expertise with 409A valuation processes – a good example of such a provider is Eton Venture Services.
But can you hire a professional 409A valuation consultant today without factoring in your budget? In the rest of this post, we’ll explore the breakdown of the different factors that influence 409A valuation cost, including why it costs roughly $2,500 to $4,000 at Eton Venture Services today.
Here are the key factors that determine 409A valuation cost
At Eton Venture Services, you’ll certainly find an extremely reliable 409A valuation consultant, who will provide you with everything you need at the right time. The cost of a 409A valuation at Eton varies from company to company based on a variety of factors, but you can expect to pay between approximately $2,500 and $4,000. Below are the key factors that causes this variation in 409A valuation cost today:
1. Stage of a company
The stage of your company can certainly influence how much you have to pay to obtain your 409A valuation. This is simply because many companies are in different stages with fundraisings, technologies, revenues, assets, and the like.
The stage your company is at when you raise your seed funding is certainly different from what it’ll be a couple of years later when you are raising a later stage financing or when you are generating revenue (and when your securities and stock options become more valuable). These factors, driven by stage, play a role when it comes to determining how much work a valuation consultant must provide, and therefore, the 409A valuation cost. You should expect the valuation cost to go up as a company progresses to mid to later stages because different stages require different analyses, which drives how a valuation consultant will perform the work when doing the valuation.
2. Company size
A company’s size can definitely affect its operations and capital structure. New businesses in the seed funding stage will certainly have a simpler capital structure than companies that have been running for a few years with measurable growth.
That said, to understand the 409A valuation cost, the valuation consultant will first look at the size of your company to understand your capital structure. The more complex this structure is, the more time it will take for the consultant to do the work, and the more you’ll have to pay to obtain your valuation result. Why?
- More complex financial structures require 409A valuation consultants with a higher level of experience and expertise, and that higher skill typically requires a greater cost.
- Complex financial structures need more resources and data to generate the 409A valuation – this also requires more money.
3. Complexity of share structure
The two aforementioned factors all point to one thing – the complexity of the company’s capital structure. The longer your business stays in business, on average over time, the bigger its size becomes and the more complex the company’s capital structure gets. Having a complex capital structure means the valuation consultant needs to put in a lot of time, effort, and industry knowledge, to arrive at an defensible 409A valuation.
4. Turnaround time
Working with a reputable 409A valuation consultant ensures that your valuation can be processed within a reasonable time frame. While most valuation providers produce 409A valuations in 3 to 4 weeks, some, such as Eton Venture Services, do them more quickly in 7 to 10 days. Expedited services are available for those requiring a valuation within a very short time frame of, say, 1 to 2 days, but this option incurs additional fees. Eton Venture Services’ standard processing time for a defensible valuation is 10 days. To deliver a valuation in just 1 day, the valuation consultant must dedicate exclusive attention to your project, which understandably results in a higher 409A valuation cost.