Turn the emotional perceptions of your customers into your most prized asset
How to value your brand
At the start you can power a business through sheer force of personality. To keep growing, you will sooner or later rely on translating your sense of purpose and vision into a brand that your team can communicate to a wider audience.
When you position yourself clearly, put across a compelling message, have a distinctive image and line up your routes to markets, then doors will start to open and your brand can become your most prized asset.
At the lower end, you might command an extra 2%-3% at retail. At the top end, your premium could be closer to 15%. Perhaps even more.
Your return will also be determined by whether you are competing in a niche or in a mass market. Once clearly established, a brand can become a highly predictable generator of cash.
However, as an asset, it remains intangible in character, based ultimately on the perceptions of your customers, so different approaches are taken to calculating its value.
- You can work out how much it would cost to replace your brand if you had to start all over again or if you did not already own it
- Or, if an active market for your brand exists, you could make a direct comparison with the prices charged by your competitors
- However, brands are usually unique by definition, so you are more likely to put a multiple on the royalties, revenues or profits that you expect to earn over the next three to five years. The base figure you select will depend on the nature of transactions within your industry.
The value that you reach is likely to depend mainly on a model that discounts your estimated future flows of net cash. You can then support this outcome with benchmarks from your industry and with the cost of creating your brand in the first place.
Even so, the equity in your brand is often defined as ‘goodwill’. In putting this value to the test when closing a deal or lining up finance, a tighter definition will be expected of the elements that underlie your brand.
Your trademark and who owns it. Your copyright and your design. Your data and your customer insights.
This intellectual property is relatively inexpensive to acquire. The challenge is to record it in such a way that justifies the premium that you feel your brand warrants.
SMEforGrowth Editor 28.06.16