Brand Valuation Advisory

Brands are no longer limited to ads or corporate profits but have become an integral part of our daily lives. The word brand refers to names, words, signs, icons, and logos that are used to distinguish products, services, and businesses. In today's competitive market, having a strong brand is important for standing out. There is now widespread recognition that brands play a critical role in producing and maintaining a company's financial success. Brands provide the foundation for defining substantive distinctions between seemingly identical offerings in an environment where functional differences between goods and services have been reduced to the point of near invisibility.

The method of calculating the worth of a brand, or the amount of money some individual is willing to pay for it, or the financial value of the brand, is known as brand valuation. It is a method for determining the worth of a brand based on financial success, brand equity, and consumer perception, among other factors.

“Before measuring the brand's value, it's important to understand that brand value takes into account all that customers associate with your brand and image, including your trademark, brand name, visual assets like a logo or colours, unique marketing plan, strategy, digital assets or licences, and level of customer loyalty”.

Brand Valuation can be used for many purposes, such as:

1. By purchasing another business entity, a corporation or agency usually does not pay the book value. Goodwill is the difference between the charged acquisition price and the book value. The worth of a corporate company that is not explicitly attributed to its tangible assets and liabilities is known as goodwill. Estimating a brand's financial worth using brand valuation allows us to figure out how much of a premium over book value a customer can pay.

2. Licensing is one way to capitalise on the appeal of a strong brand by broadening or allowing it to be used in new ways. An approving course of action will benefit both the licensor and the licensee financially. Another source of revenue for the licensor is a small amount of capital speculation. The licensee benefits from lower marketing, publicising, and client acquisition costs.

3. While businesses do not report marks on their financial statements as long-term assets, financial markets recognise the impact brands have on investor confidence. Organizations with strong brands consistently receive better budgetary terms than those with weak brands. The stronger the terminology, the higher the brand's estimation by brand valuation.

4. Hard measures, such as sales and market share, and soft measures, such as credibility and recognition, are typically compared across brands and against rivals in brand investment evaluations. It is also crucial to evaluate the financial worth of certain brands. Companies may use brand valuations to determine their return on investment in a brand and establish effective investment strategies through a portfolio of brands.

5. Advertisers who would make decisions about how to allocate their budget and resources use the marketing mix. Organizations can now better predict the mix of marketing vehicles needed to increase both spending capability and advertising viability. Brand valuations are an important part of the marketing mix for a few companies.

Three approaches to measure the value of any brand are:

1. Cost Approach: This method assigns a value to a brand based on the costs associated with its development since its inception. Historical ads, marketing budgets, cost of campaign development, licencing and registration costs, and the cost of any trademarks are all items to consider when calculating costs. You must measure the brand's expense and restate real costs in current cost terms by using cost-based valuation. If you've recently launched or are in the process of redeveloping your brand, you can use this form of brand valuation. It's important to remember that, while this approach estimates the brand value using specific costs, the final figure doesn't always represent the actual value of a brand. Changes in consumer opinion of your brand, media coverage, or market changes can all increase or decrease the value of your brand compared to the cost of building it.

2. Market Approach: It makes one or more comparisons between your company and similar products that have been marketed in the past. A single selling of a brand, equivalent business purchases, or stock market quotes may all be used as reference points. The value for which a brand may be offered, as determined by this method, is equal to a market transaction price, bid, or offer for equivalent or equally similar brands.

3. Income Approach: The income method determines the present value of a brand by looking at potential net profits that can be specifically applied to it. Using this approach, the brand value is equal to the value of revenue, cash flow, or cost savings realised or anticipated because of the brand's popularity or recognition.

Under these approaches, there are various methods that can be used to value specific brand. Selection of any approach and the methods of brand valuation depends on the situation for which this valuation is required.

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