What is the Brand Valuation?

Narendra Kumar

02 Dec, 2020

Brand valuation is a job of estimating the total financial value of the brand. Like a valuation of any product or self-review, a conflict of interest exists if those that value the brand also was involved in its creation.

Introduction of Brand Valuation

It is defined as the word, mark, symbol, design, term, or the combination of these, both visual & oral, used for purpose of identification of some of the products or services. It is a hallmark of the shrewd businessman to commence his business valuation with the roadmap of his plans. In the course of his business, he applies the unique mark or the symbol or the word to his goods. When his consumer base rises, his goods acquires the reasonable reputation & his consumers begin identifying his goods by a unique mark or symbol or word he had so adopted, his goods earn the reputation of being the branded goods. What applies to goods also applies to services. When brands take charge of the consumers’ mind, the name of its proprietor takes a backseat. There lies the power of brands.

What are the Functions of Brands?

The Importance of Brand valuation

Just think as to how much investment a person has to make by means of money & other resources to adopt, develop & popularize a brand or the mark during a course of his business. Brands or marks are the class or classes of assets such as human resource, knowledge, etc. They create a value premium for such goods & services. Therefore, without the brand or mark, the goods or services may be addressed less. So as to market it or use these assets wisely valuing the same is crucial. However remember, the valuing a brand is the most difficult task. There isn’t any prescribed manner to value any brand. But everyone knows that the brands connect markets with the products & thereby they create value.

The Brands don’t command any value except they are able to bring cash flows to a Company that has adopted the same. With incremental cash flow growth, a value of brand rises respectively. Brands have to be constantly associated with the good quality goods & services; they require the proper showcasing & servicing & they should remain active in an appropriate market.

Protection of Value of the Brands

With the purpose to sustain valuation of the brand, there must be a continuous attempt from the Company on the following aspects:

• To secure registration of the Brand in every relevant class.
• To secure the registration of the Brand in all the countries where there are chances to sell Branded Products of a Company.
• To set up a “surveillance team” within the Marketing Department of the Company so as to make sure that there isn’t any dilution to the value of the Brand.
• To make sure that the attempts to use fake brands which are similar or deceptively similar are challenged with full force so as to spread the message that the Company is conscious of the value of its brand & it will be aggressive in taking steps not only to put an end to such illegal, dishonest & unauthorized use but also to punish such users & claim exemplary damages from those who had passed off their goods to people & those who are found to be guilty of infringement.
• To make sure that there is always the budget allocation for promoting a brand & a Company should devise the continuous process for being present in existing markets & prospective markets.
• To ensure that there is a conspicuous distinction in the description of the brand when it is used to sell premium products as opposed to the use of the same brand for selling the goods to the masses.
• To make certain that an extent of growth in the value of the brand every year is always higher than depreciation or dent that existing or the new competition may cause.
• To adopt the proper policy with regard to the slogans & catchy phrases so that a Company doesn’t knowingly cause any infringement of industrial & intellectual property rights of any other person in the country or territory. To adopt the proper policy with regard to statements made in advertisements carrying the brand in order to ensure that those statements are not more attractive words & they would stand the test of the market.
• To adopt a proper policy to augment IP profile of the Company & constantly update & upgrade the same.

How do you determine the value of a brand?

It considers the valuation of the future net earnings that directly attribute to a brand to determine the value of a brand in its current use. A brand value using this method is the same as the present value of the income, cash flows, or cost savings actually or hypothetically due to an asset.

Advantages of brand valuation

• Valuing a brand has a distinct advantage of converting a brand from being an expense on the P & L statement to an asset on the Balance Sheet.
• Brand valuation has little credibility, however competent the valuer if the firm cannot provide a recorded history of capturing the key marketing and financial value drivers that are critical to the value of the brand.
• This, therefore, reiterates the requirement for good internal brand management systems.
• It enables the brand to be managed against the same criteria as other investments in the firm.

Questionnaire for making an inquiry into policies

For the purpose of valuation of brands, it may be necessary to make a thorough inquiry into the policy & business of a company to the extent they relate to the brands. For such an inquiry, the following questionnaire may prove to be helping some of them are as follow

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