Brand Valuation – what does it mean for small businesses?

Emperor Jahangir weighing his son Shah JahanBack in September 2010 the new standard for brand valuation, ISO 10668 was announced. What this means is that there is now a new standard that includes market and financial analysis, and legal assessment to be carried out to support the valuation of a brand as a corporate asset. accountants have always been far happier valuing tangible assets such as plant, machinery, buildings and stock, rather than intangibles such as brands and intellectual properties.  The new standard is intended to create a formally agreed standard for valuing these intangibles and should make accountants and financial analysts a bit happier.

What does this mean – if anything – for small and medium businesses (SMEs)? If you are Virgin, Proctor & Gamble or British Airways it is obviously important that your brands are valued and show on your balance sheet. Similarly, if you are a major corporate in the market for acquisitions, you want to know what the brands you are buying are worth: the brands may be all the business owns (remember Shop Direct buying the Woolworths UK brand a couple of years ago).

For SMEs, this may all seem a bit theoretical: it only matters if you are looking to sell your business, right? Well, there are other situations such as mergers, restructuring to introduce subsidiary brands, to enter export markets or for legal reasons. I’m not suggesting anybody rushes out and carries out a brand valuation – they are complex, time-consuming and costly – and probably unnecessary unless one of the situations we just mentioned is looming. The point is that with the new standard we are likely to see branding and brand valuation much higher on the business agenda of larger companies, and that means that the brands of small companies are going to take on more significance.

You may feel that your brand is small and unimportant, but the longer you trade with that brand you are making an investment in it and its value is growing. Nearly every big brand started life as a small brand. All that small businesses need to do is beware of their brand and be aware that it has a value now, which should only increase over time. All that is needed is some vision.  Imagine where your brand and your business will be in, say, five years time. Where would you like it to be… what are your aspirations? Blue sky a little. Do you want to sell it or maybe a flotation? Are you looking to diversify? Maybe you want to dispose of parts of the business, go into a joint venture or perhaps grow by acquisition or open export branches? Maybe you would like to franchise you business? At some point the question of the value of your brand is now more likely to raise its head. Say you decide to sell, will your asking price purely take into account tangible assets, or will you ask a little more for the brand?

This is not just theoretical: imagine if you said to your imaginary buyer, ‘Okay, I will sell you the whole business at a price based upon the assets, but I want to keep the business name for another venture I have in mind.’ You can imagine what they would say… because your brand has a value.

ISO 10668 has just brought into focus the need for a little strategic brand planning and a weather eye on your brand value. Some things all businesses should be considering:

  • Take a ‘snapshot’ of where your brand is now: what it means, its strengths and weaknesses
  • Imagine how your brand structure may need to change over the next few years so you can have pro-active strategies and not just be reactive.
  • Take a long-term view assuming a growing brand.
  • Try to ‘guestimate’ the value of your brand – imagine you were selling or licensing it, or look at how much you have invested in it in terms of advertising, promotion, labelling etc.
  • Regularly revisit that ‘guestimate’
  • Protect your brand – register any names,  trademarks etc. It’s not very expensive, considering the potential and gives you a basic measure of protection.
  • Plan a basic brand strategy: consider what changes, developments and modifications you may need to make as your business grows.

If you want to know more about ISO 10668, go to: http://www.iso.org/iso/catalogue_detail.htm?csnumber=46032

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