What’s Your Brand Worth?
Do you understand the value of your brand? There are a number of ways to calculate its worth.
Building a successful brand requires a significant investment of creativity, time, and resources. But the pay-off can be extraordinary: better market positioning, clearer connections with customers and prospects, and even an increase in value to your business.
“When businesses sell off, half of the price is not for the physical assets of the business, but for the goodwill that’s associated with the brand—and that includes everything from client lists to marketplace awareness to premium pricing that they get simply because it has their name on it. That is why it is so important for people to understand the value of their brand,” says Portland, Oregon business strategist Barbara Findlay Schenck, founder of BizStrong.com and author of Branding for Dummies.
Strong branding can add value beyond the strict revenue multipliers that typically determine business value. But what factors actually influence the value of your brand? There are four key elements to consider:
One of the biggest drivers of brand value for small businesses is the determination of what someone would pay to acquire the brand, says Martyn Tipping, principal of TippingGardner, a New York City brand consultancy. Competitors may be willing to pay a premium if you have strong recognition that can enhance their business base. Evaluate not only how much your business would contribute to the bottom line, but also how the transaction would help them get more mileage from marketing and reduce cost per sale.
2. Trademark value
Another element that will reinforce a brand is how strong its trademarks are, Tipping says. Does your brand have a distinctive, “ownable” name and accompanying Web domain? Can you protect your brand from trademark violations? You can’t build brand equity in names you can’t protect, he says. Investing in trademark protection is essential for extract the maximum value from your brand.
3. Premium pricing
Strong brands often enjoy the benefits of price elasticity, especially in the form of premium pricing, Schenck says. Let’s say you own an accounting firm. You’re probably competing against other firms for similar clients. Conventional wisdom says you’d likely have to charge similar rates for the same services. However, some firms can charge $90 per hour while others command $150 per hour. “Why do some clients pay $150 per hour? Based on the strength of the brand of that accounting firm or that accountant’s name,” she says.
4. Cost of brand
Another factor that influences brand valuation is what it would cost to build a similar brand, Schenck says. Consider the investment necessary to replace the brand identity and the level of marketplace awareness the brand enjoys. If the brand is strong and well-known, the cost of recreating that level of awareness may be cost-prohibitive, while giving your brand additional value.
If you’re looking for a way to validate the investment you’ve made in your brand—and look beyond just your physical assets—these factors can give you insight into its overall value to your business.
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