Determining the value of a brand is not nearly as simple as it sounds, for one surprisingly simple reason–brands are not businesses. A brand may be a certain aspect of a business, but it is largely intangible, and it is very difficult to assign a monetary value to intangible assets. Running a business valuation is a relatively straightforward matter of number crunching. Your sales, assets, debts, and growth all factor together to determine a realistic estimated value of your business. But how can you do the same for your brand? Determining the value of your brand can be done, but it is not as easy.
First, you need to come to a workable definition of the word “brand” as it applies to your situation. What does your brand include? A brand is much more than just a name and a logo, of course. A brand is an accumulation of intellectual property and business strategy that evolves over time. You may need to consider trademarks, advertising campaigns, packaging, slogans, and even colors that are strongly associated with your brand. The combination of all these things leads to the conclusion that not only are brands highly valuable, they are very often more valuable than the businesses they represent.
As an example, assign a value to a hypothetical company. For the sake of simplicity, assume that Company X is worth $1,000,000 today. That valuation was determined by analyzing concrete figures. Now, consider the brand associated with Company X. This company has regular commercials running on prime time TV, full page advertisements in the most popular magazines, and a logo and slogan that have become household terms over the past several years. This degree of brand recognition makes the value of Company X’s brand significantly higher than the value of the company itself. The market dominance of the brand and its potential for growth factor heavily into this valuation.
Some brands appreciate over time–they become increasingly popular and generate more money for their businesses over time, becoming increasingly valuable. Other brands are simply trends that come and go. Your brand’s age is a significant factor in its valuation for this reason. A brand that is older than most and has retained its popularity can be considered timeless–these are the brands with the most value. A brand like Coca Cola or McDonald’s, for example, may be worth billions more than the company that it represents due to its established place in the market.
Whether your brand is a big name like Coca Cola or a lesser known web-business like NeonSigns4You.com, determining a brand value is a difficult, but worthwhile exercise. Consider everything that your brand includes, as well as the costs of developing that brand. Think about the income generated by your brand, as well as its age and its perceived market value. Many people are fiercely loyal to their favorite brands, which adds more to their value. Assign a value to your business first, and then proceed with your brand valuation from there. Remember–in the end, anything in the world is worth only what the buyer is willing to pay.