BRAND VALUATION
Brand valuation is an exercise to estimate the value of a brand. Now the question arises what is brand and motive of this article is to provide a glimpse of Brand Valuation. Brand is an intangible asset of the company which includes things like trademarks, logo, colors used, the way of packaging of goods etc. or in simple terms we can say it is face of the business. It provides a competitive advantage to the company against its competitors in the industry. Generally most of the entrepreneurs are of the view that it is only tangible asset like plant and machinery, land, building etc. which contribute to the growth of a company. But on a reality check, brands also have a heavy hand in this regards. Valuation of brands for a company comes in use by various stakeholders like corporates, government for taxation purpose or dispute resolution or licensing, by purchaser in case of slump sale, by bank or financial institution in case of providing loan, also by the management to develop business strategy accordingly. Brand valuation has to be based on principals like transparency, validity, reliability, sufficiency etc.
Specialists
in the valuation industry use three approaches for Brand Valuation. These are
elaborated as follows:
1. COST APPROACH METHOD
In this
approach, the brand is valued in accordance with the cost incurred to develop a
brand. It includes the present cost as well as the historical costs incurred from
the point of generation of brand itself. It should be kept in mind that the
historical cost should be taken as per their present values.
2. MARKET APPROACH METHOD
As the name
suggests, this method value the brand in accordance with the value of similar
brands present in the market. It implies the price at which the brand could be
sold out in the market in the present date. This method is based on the
principle that similar type of brands has comparable market value in the
industry. Market approach method is easy to be employed but sometimes it is quite
difficult to find out the brand of same nature.
It is a type
of futuristic approach. It takes into account the present value of the cash
inflow to be generated in future date just because of goodwill of brand. Higher
the value generated because of brand, higher will be this value.
To conclude
this article……
Generally it
becomes difficult to decide which of the above method is to be employed while
valuating the brand, however the best way to value the brand is to employ all
the above given method and to conclude it in accordance to the weights provided
to each method.
Also along
with the methods employed, the knowledge, experience of the valuer also plays a
crucial role in brand valuation.
Thanks and
regards
PureValue Research team
www.pvalueresearch.com
