What is the cost of a 409a Valuation?

Do you know what a piece of your company is worth? If your company is a public, then the value is set by the market. But in case it is a private firm, then it all depends on independent appraisers. That is where the IRC Section 409A valuations come into the picture. A 409A is an independent appraisal of the fair market value (FMV) of a private company’s common stock or the stock reserved for founders and employees. This determines the cost to purchase a share and is found by using one of the 409A valuation methods.

Getting a 409A valuation for startups is crucial to comply with tax regulations, properly value their equity for compensation purposes, and establish a fair price for issuing stock options to employees and service providers.

How much does a 409A valuation cost?

The cost of a 409A valuation typically ranges between $2,000 and $5,000. The pricing changes depend on the company’s growth stage, size, and complexity. An expedited 409A valuation, especially one needed in fewer than 10 business days, often incurs an additional fee due to the increased effort and faster turnaround required.

409A Valuation Price Comparison

Eqvista provides 409A valuations at a price 30% lower compared to other providers while maintaining the high quality of the valuation report. This means you can receive a professional and accurate 409a valuation without paying the higher prices charged by other valuation providers.

Eqvista’s reasonable 409a pricing stems from the following reasons:

• Eqvista offers unlimited 409a valuations for 12 months at a fixed annual price, allowing companies to perform multiple valuations throughout the year without incurring additional costs for each valuation refresh.
• Our in-house team of NACVA-certified valuation analysts conducts valuations efficiently without relying on external vendors.
• Optimized 409A valuation process, enabling the completion of valuations cost-effectively within a short timeframe.
• We developed a platform and cap table software to handle client data and equity details, saving time and effort.
• Eqvista has gained expertise by conducting valuations for various companies in different sectors, allowing us to optimize the process through our experience.

Eqvista’s 409a valuation pricing tiers are based on funding rounds but may vary depending on other factors, including total revenue, number of employees, and capital structure. For example, a closely held company with sales of $5 million, 50 staff, and no previous funding may be equivalent to a Series B. Tell our staff more information to get an accurate quotation.

For a startup in the earliest stages of development, this seems like a huge waste of money and time, which could be used to instead grow the business. So, if your company has no revenue, no assets, and no proven business model, should you pay someone to tell you what you already know – that your stock is worth so little?

Factors that determine 409a valuation cost

As mentioned above, Eqvista can help you with getting you the 409A valuation using one of the methods that best suits your company’s stage, situation and industry.

Here are some key factors that will determine the price of your 409a valuation.

#1 Stage of company (Seed, Series A, Series B, Series C)

Every stage of the company has a different number of shareholders, assets that the company holds, and overall value. Due to this, it is very important to look into the stage of the company before the cost of the 409A valuation is determined. A company begins with a seed funding round, which is the first funding round to help get on its feet.

After the seed funding comes in the Series A funding, which is the first Venture Capital (VC) funding that the company gets. Then comes the Series B funding round that takes the business to the next level of the expansion stage.Followed by this is the Series C funding round, which occurs to make the appealing to support a public offering or for an acquisition.

Some companies stop at this stage, while some move to further stages like the Series D funding or even private equity funding rounds. Each round makes the company bigger, where different stocks and equity options come in question. Due to this, each stage has a different price and since the efforts and calculation process gets intensified as we move to the next stage, the 409A valuation costs also increase.

#2 Size of company (revenue per year, total amount of assets)

Another factor that affects the 409A valuation cost is the size of the company. To put it in simpler words, the smaller the company is and the lesser the complexity in the operations is, the less expensive it is. And if it grows bigger, their operations eventually become more complex.

This tells the size of the company and it also impacts the cost of the valuation. So, as a company grows in size, the valuation process becomes tough and the 409A valuation costs increase. Keep in mind that this is just an idea on how this affects the cost. The actual costs can be determined only when the evaluator gets the financial statements of the company to see the revenue earned, the assets owned, and the operation process.

#3 Complexity of Share Structure

A simple share structure in a company is when there is only one kind of equity class and only common shares are issued. This is normally the case of it has just incorporated and has only the founders and some employees. For instance, if the company wants to take up funding with just the founders and a few employees and doesn’t have a high value, that is when the company might issue convertible notes.

And as the company grows, they will be issuing warrants, employee options, preferred shares and so on. This means that as the time passes, the share structure becomes more complex. So, with a complex share structure, it is tough to get the valuation done so easily. This complexity in the share structure may contribute to a higher 409a valuation cost.

#4 Turnaround Time

Expedited turnaround times faster than the standard 10-20 days incur premium fees, which can add $1,000-$3,000 to the cost of rush jobs. Companies like Eqvista can offer a 409A valuation cost for expedited service in 3-5 days for $890.

#5 Valuation Provider

Larger firms charge around $10,000-$25,000, 409A valuation cost which is probably not affordable to small companies. Companies like Eqvista provide accurate and affordable 409a valuations for both small and large companies.

409a valuation reports with EqvistaGET STARTED!

Eqvista offers 409a Valuation starting at $990

With all that said, Eqvista is a professional valuation service provider on the market. Our team at Eqvista believes in offering affordable and efficient solutions for companies managing their equity. Our 409A valuation costs begin at $990 and go up based on your company’s age, history, industry, and more.

Eqvista’s 409a Valuation Process

• Hand over your data: This will include your cap table, articles of incorporation, financial projections, term sheets, any past 409A reports, and other required documents.
• Provide quotation, sign engagement letter and settle fees: We discuss a price for the 409a valuation. Once agreed upon, we will send you an engagement letter outlining our 409a valuation services, and upon signing the letter and settlement of the fees, we can conduct the valuation.
• Run the report: We will conduct the valuation and may ask you some follow up questions if need be.
• Review first draft
• Revisions
• Final report is delivered

The price of getting your company valued would be entirely on the kind of company you have, its age, industry, and other factors. So, the best way to find out how much it would cost is by connecting with us so we can understand your company better.

With this we would be able to offer you our best price for your 409a valuation. We will always be ready to explain how our prices are set and open for the best way to handle your valuation. Eqvista also offers our cap table software for managing your equity. Our application is FREE to use (for small companies).

FAQs

Here are some commonly asked questions and their answers about the costs of 409A valuations.

How Much Is The 409a Valuation For Larger Companies?

For very large corporations, 409A valuation costs can exceed $10,000. Companies like Eqvista can customize the plan according to their size and budget.

The Lowest Possible Strike Price Is The Goal Of 409a?

The goal should not be the lowest strike price but the lowest defensible price that adheres to IRC 409A and can withstand IRS audits. Valuations that are too low raise red flags and may get rejected by the IRS.

How Does The Size Of A Startup’s Team Affect The Cost Of A 409a Valuation?

Team size is not mentioned as a direct cost determinant. However, it likely correlates with overall company size, stage, and complexity that drive costs.

Expert Tips for 409A Valuations

• The key factors driving 409A costs are the company’s funding stage, cap table complexity, and the turnaround time needed.
• Use independent valuation firms with strong reputations that follow IRS-approved methods. This ensures compliance and establishes a defensible safe harbor valuation.
• For 409A valuations, the primary cost drivers are a startup’s funding stage, size, cap table complexity, desired turnaround, choice of provider, and need for an audit-defensible valuation.

Maximizing Your Startup’s Value with Eqvista’s Cost-Effective Valuation

If you’re looking for affordable valuations and need to maintain the quality of reports, Eqvista is the right place for you. Not only this but our valuations are always guided and monitored by experts. Our 409a valuation pricing tiers are based on funding rounds but may vary depending on other factors, including total revenue, number of employees, and capital structure. If you’re interested in getting a 409A, please get in touch with us.