According to David Haigh, CEO and Founder of Brand Finance, up to 75 percent of a company’s value lies in the intangible assets. This includes trademarks, patents, copyrights, proprietary processes, procedures, specialized knowledge, credentials and anything else that is unique to the company. Tangible assets such as real estate, inventory and booked sales make up the balance of the company value.
Some organizations attempt to capture the value of these intangibles on their balance sheet, while others rely on the market to assign their worth through the company valuation or stock price. Either way, the contribution intangible assets make to the value of a company is undeniable.
So, a company looking to increase its value basically has two options: Invest in the hard assets or leverage the intangibles. Most companies are pretty well versed in addressing the tangible side of the equation, but it is the intangible part that may have the biggest upside.
Collectively, the intangible assets represent what is special and unique about your company. They are what sets you apart from the competition. Focusing on these assets helps you further differentiate yourself in the market and, thus, increase the value of your company.
If your company wants to uncover this untapped value, here are a few steps to get you going.
Step 1: Identify your intangible assets
The process of managing your intangible assets starts with identifying what those assets are – or creating new ones. Almost every unique thing a company does has the potential to be a valuable asset. Here is a list of where to look:
Corporate: Name, logo, tagline, trademarks, copyrights and processes.
Brand: Architecture, sub-brand names, guidelines, and internal manifestos.
Product: Design and packaging
Communications: Concepts, campaigns, icons, characters and messages.
For example, specialty aluminum products manufacturer Vista Metals crafted a unique customer service approach it branded as “You First™”. The process combines existing practices with new ideas for distinguishing Vista customer service from competitors, and it has created ongoing value in the form of loyal customers and future sales (both measures of intangible value).
Step 2: Evaluate assets
The second step is to make sure your company’s brand is clearly in place, is recognizable, and is easily communicated both internally and externally. If your company has this in place, congratulations! If not, that’s an entirely different conversation.
Having a clear, distinct identity allows you to view each intangible asset through a common lens to determine how well it supports the promise. Each asset needs to be evaluated and ranked so you have a baseline for managing them over time.
Together, these intangible items become assets that set your company apart and increase its value. No matter what valuation method you apply – cost-based, market-based, economic use, or formulary and special situation – you will see how such intangibles add to the net worth of your company.
Some may argue that the only time you really need to understand this value is if you are preparing for a major financial event (raising capital, mergers and acquisitions, etc…). Not so, according to Wes Anson, CEO of Consor Intellectual Asset Management in San Diego. “With the increasing importance of intellectual property to the value of business today, it is imperative to understand and identify key brand assets, then value and manage them effectively for sustained growth.”
Step 3: Manage your intangible assets to build value
Now that your intangible assets are identified and ranked, it’s time to see what they can do. It is the responsibility of your executive team to prioritize the list and create strategies for increasing the value of the core assets – just as they would tackle decision about the tangible assets.
The leadership team is also on the hook to communicate those priorities to the organization, delegate ownership to the business functions, and follow up on the execution. Then these key components need to be continuously promoted to employees, strategic partners, suppliers, stakeholders and customers so everyone understands what makes your company special.
In the Vista Metals example above, one of the top brand priorities was to deliver “second-to-none” customer service. The executives had to allocate resources to redefine the process, train employees to deliver it, and tell the world why it was so important. At first blush, it looks like a simple customer service program, but it is really an organization-wide initiative to build the value of the company – and it’s working.
Any company of any size can think about their intangible assets in these terms and take steps to increase their value. And since the marketing organization tends to own a chunk of the assets, it is a great opportunity for the head of marketing and the CEO to work together on building the business in a tangible way.