How to calculate the value of your brand?

What is the real value of a brand? In companies with tight budgets, how do you explain the importance and fairness of the brand? A brand can be considered intangible, and it is difficult for people to understand the value it brings to a business. It is important to take a step back to create a brand assessment to determine what your brand understands. This could be your trademark, your logo , your packaging, your marketing strategy, your digital assets, your brand colors, etc. It’s really all that consumers associate with your brand. Strong brands have a lot of value, as evidenced by the five most valuable brands in the world recognized by Forbes magazine, from 2018:

  • Apple: $ 182.8 billion
  • Google: 132.1 billion dollars
  • Microsoft: $ 104.9 billion
  • Facebook: $ 94.8 billion
  • Amazon: $ 70.9 billion

Brand development and valorization

The development of a brand requires money and is essential to be able to predict the value of the brand for leaders and investors. Brands help identify and differentiate products and services from the competition. But how can the value be recorded on the balance sheet? There are many ways to approach brand evaluation, and many of them are debatable. The concept of value can often be a difficult concept to understand. That’s because value means different things to different people, so it’s not an objective concept. The evaluation is determined by the use of the mark. The most common assessment methods and approaches are:

Brand valuation based on costs

The brand is valued using the sum of the individual costs or the value of the assets and liabilities of the brand. It is the accumulation of costs that have been incurred to build the brand since its inception. The items that you must include when estimating costs include advertising history, promotional expenses, the cost of creating the campaign, licensing and registration costs. 

You can use this method if you have just created a brand or have gone through the process of redeveloping the brand. Using the cost-based evaluation requires you to evaluate the cost of the brand and to restate the actual expenses based on current costs. The same method could be used if you had just worked on redeveloping and launching your brand. One thing to keep in mind, although costs can be collected and used, the figure does not necessarily represent the current value of a brand. Brand evaluation based on the market. This method uses one or more valuation methods by comparing similar brands that have been sold. 

You would use comparable market transactions such as the specific sale of a trademark, comparable business transactions and / or stock quotes. Market-based branding is the reason a brand can be sold. The value of the mark according to this method is equal to the price of a transaction, an offer or offer in the market for identical or reasonably similar marks. In terms of real estate, it’s as if you were researching the selling prices of similar homes in the same neighborhood before setting the price for your own home.

Brand valuation using the income approach

This method is often called the “in use” approach. It takes into account the assessment of future net income that can be attributed directly to the brand to determine the value of the brand in its current use. The value of the brand under this method is equal to the present value of the revenues, cash flows or cost savings actually or hypothetically attributable to the asset. 

Brand equity is one of the few assets of a company that can provide a sustainable competitive advantage. There are many methods that can be used, which means that it is not difficult to manipulate the results of measuring the value of one’s brand. In order to avoid any abuse, it is important to identify the purpose of the valuation and to use the appropriate method and assumptions to determine a fair value. It’s fair to say that branding can be more of an art than a science, but it can help identify and develop the value proposition behind your brand.