Branding – Intangible Assets Increase the Value of Your Business

Although business owners may believe the brand registration product you sell is the most important part of a business, think again. It might seem strange, but your company’s most valuable asset is often intangible, the brand. The brand is the intangible asset or name that the public associates with the product. Creating a brand registration and enforcement program for your product is the only means to protect your most valuable business asset.

In 2003, intangible assets and goodwill constituted 74 per cent of the average purchase price of companies acquired in the United States. “Good will” is the positive reputation that a business has cultivated and accountants as well as business valuation experts understand that it is an asset carried on the books. In the digital age, new opportunities and new challenges demand a strict company policy in order to increase the value of intangible assets, including trademarks and the good-will they represent. Why would anyone ignore protecting 74% of the value of the business?

Lucky for business owners, the law can help them protect and capitalize on their good will through trademarks. A trademark is a word, symbol, slogan, or even a sound that identifies the source of goods or services in commerce and serves as a symbol for good will. The mark NIKE and its famous “swoosh” are both trademarks of the company.

When the public sees either one, most people assume that they were made by NIKE and meet a certain quality standard. In today’s world, famous brands go beyond serving as indicators of source, they are now equated with a life style, a community, or a social standing in the global community. In this sense, the trademark can, through proper nurturing, become the “good will ambassador” of the company – the company’s reputation stands behind its mark.

In the beginning of the branding process, business owners must take steps to insure that there has been proper registration of the trademarks, the company’s good will ambassadors have been properly selected, and the company is represented correctly in all advertising and marketing materials. It is important to keep in mind that periodic “tune-ups” are required to maintain the good health of the trademark. This includes maintaining registrations as required by law, monitoring usage in advertising and marketing, and watching the competitive landscape for possible intruders.

Although your brand value might not matter to you now, at some point in the life of a business, major events can intervene. The business may be sold or merged, a major partner may die or withdraw, a divorce will require divestiture or buyout, a venture capital investment, or an initial public offering may be in the cards. From an accounting perspective, good will is an essential element that must be considered in determining the value of a business.

The value assigned to the good will as an asset in such cases is dependent upon the protection and enhancement the business has experienced throughout its lifetime. Therefore, make sure your business has a detailed brand

 

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