Calculating and understanding brand value is central to Intangible Business's work. There are a number of ways of determining brand value and Intangible Business considers all of these when valuing intangible assets such as brands, copyrights and customers. For the banking market a range of brand values is calculated, with the highest brand value being what the brand is worth in current use given a set of positive assumptions and the lowest brand value being what it would be worth in a distressed situation. In the bank lending market this distressed brand value is the key value as it underpins the value of a loan. In other circumstances such as M&A, an opportunity brand value may be more appropriate.
Intangible Business adopts three main approaches to determining brand value:
Income valuation
Forecasting future cash flows that are directly attributable to the brand or other intangible asset is central to this approach. A royalty rate is applied to the future cash flows which is then discounted to reflect the risk and time value of money. This approach is especially pertinent for an opportunity brand value determination.
Market valuation
Other similar brands that have been acquired are analysed for comparability. This gives an indication of the value the market puts on particular assets. The variations between the brands can be stripped out to arrive at an objective brand value to compare against. This approach is most relevant to supporting the low valuation.
Cost valuation
A cost valuation considers the cost of recreating the intangible asset - building it from scratch - and the amount that was spent in building the asset in the first place.
Intangible Business generally uses an appreciation of all three approaches, tailoring the final valuation to suit the particular project requirement.