As a business owner, it is important to be prepared to monetize every component of your business. Brand value has a significant importance in the market value of a company. For many companies, brand related assets have a direct impact on sales. Even some of the brand’s worth thousands or millions of dollars, these are rarely noticed as a distinctive intangible asset in the financial statements.
Why is it important to register your brand value in accounting?
Your business will have official records of this intangible asset value, that can be further used for business sale, strategic planning or taxation compliance. The significant importance of the financial role of brands has been recognized through the development of specific accounting standards.
How can a brand be evaluated?
Three main methodologies for brand valuation can be used:
- The cost approach, takes into consideration the brand investment, costs associated with brand creation and development;
- The income approach, monetize the present value of economic benefits generated by the brand;
- The market approach compares market values of similar brands.
What can you do to prepare your business for a brand valuation?
Brand valuation is performed by third party professionals, who collect and evaluate data to estimate the brand value. Your business can be prepared for the valuation process through brand building activities that can be financially quantified.
Brand building activities contribute to the increase of the brand potential, through transparent records of inflows and outflows generated by a brand.
For instance, if we take into consideration the marketing expenses for online business development, you can prepare your company records for brand valuation, by following the next steps:
Plan and clearly structure your brand associated costs
A sample structure of diverse marketing costs matched with brand value building activities is presented below:
- Brand reputation building: Backlink Audit & Management, Content Build Up Services, Social Media Identity Protection. Website Audit;
- Brand visibility: Article Marketing, Blog Promotion, Coupon Submission, Twitter Directory Submission, Documents Sharing, Press Release, Social Bookmarking, Social Media Branding;
- Brand visuals: Infographics, Quote graphics, Logo, ebooks, Website Design.
Agree with your accounting team the chart of accounts is used
Mapping your brand value building activities with the chart of accounts used in the accounting is the next challenge to pursue. A good communication with your accounting team is vital in this process. The most important step is to agree how to integrate within the advertising and promotional expenses account the brand associated costs. Using analytical accounting is an effective method to match brand value building activities with analytic accounts.
Engage your employee in the financial process of building brand value
Maybe an accountant is not always aware what is the activity behind an invoice if it is brand related or not. Thus it is important to make employees accountable of the future importance of documents that will be registered in accounting. Relate your marketing meetings not only to the activities that will be performed but also to the invoices that will be collected from third party services and which of those are directly brand related a communicate findings to the accounting team.
Once your business is prepared for the evaluation process, it will facilitate the estimation of the brand value. And once you have it, you can monitor it over time and take the necessary actions to increase that value.