ISO 10668-2010: What is Needed for Brand Value Measurement?

Besides the different methods of monetary brand value measurement, there is an international standardization called ISO 10668-2010, which is created to align the reporting of the available methodologies.

We share how our brand valuation methodology – the Isolated Brand Valuation© Method – complies this ISO 10668-2010 standard.

This article contains:

1. Requirements for Brand Valuation

1. Declaration of purpose
2. Value concept
3. Identification of the brand

2. Composition of reporting

3. Necessary valuation inputs

1. Market and financial data
2. Legal parameters affecting the brand value
3. Sourcing and use of quality data and assumptions

1. Requirements for Brand Valuation

First, the ISO standard states that there are specific requirements to come to a monetary brand valuation. These requirements are:

• Transparency, which means that the process of a monetary brand valuation should be fully transparent. The brand valuation inputs should be disclosed and quantified, as well as assumptions and risks.
• Validity: The basis of the brand valuation should be based on valid and relevant inputs and assumptions.
• Reliability: If a brand valuation has to be monitored repeatedly, it should give reliable, comparable and reconcilable results.
• Sufficiency and objectivity: The valuation should be based on sufficient data and analysis to form a reliable and free from any form of biased conclusion.
• Financial, behavioral and legal parameters, which should be taken into account and form part of the overall assessment.

More specific, the report in which the monetary value of the brand is stated should contain the following elements:

1. Declaration of purpose
   Purposes of a monetary brand valuation differ. In our experience, the most used reasons are legal transaction, liquidation, and loan and/or equity financing. However, brand valuation could also be used as a steering mechanism for your company. Once you know how the value of your brand is established, you also know which buttons to flick to increase the brand equity. Lastly, can be very useful management information and input for strategic planning.
   The purpose of a brand valuation, conform ISO 10668-2010, should also specify the:
   • intended use
   • addressed audiences
   • identified the asset
   • premise of value
   • position of the appraiser (valuator)
   • valuation and value date
   
2. Value concept
   The monetary value of the brand should represent the economic benefit conferred by a brand over its expected useful economic lifetime. Generally, the monetary value is calculated by reference to cashflows, determined by reference to earnings, economic profits or cost savings. However, the Isolated Brand Valuation© methodology has a more specific, from a marketing and branding perspective way of monetary valuation. This sets it apart from methods as Discount Cash Flow (DCF), Premium Pricing and Relief from Royalty.
   
3. Identification of the brand
   In brief and within ISO 10668-2010, this sub is a description of the brand subject to valuation. Our Isolated Brand Valuation© methodology has a broader identification scope. It identifies the name of the brand, the position within a company, product range or a brand architecture.
   

2. Composition of reporting

Every monetary brand valuation report contains the following details:

1. Purpose of the valuation
2. Identification and isolation of the subject brand
3. Brand related assets
4. Premise of value
5. Approach and used method
6. Valuation and value date
7. Result of the brand valuation
8. Used data set and its sources
9. Overview of legal rights, behavioral aspects and financial analysis
10. Key assumptions and sensitivities
11. Limitations

3. Necessary valuation inputs

1. Market and financial data
   To assess the market in which the subject brand operates, an analytical review of the current and predicted market volumes, values, margins and channels must be performed.
   When applying the market approach, an analysis of the behavioral aspects is necessary in order to determine the appropriate multiples.
   
2. Legal parameters affecting the brand value
   Legal parameters we take into account:
   • Scope of use / of registration (territory, goods and services)
   • Extent of use
   • Distinctiveness
   • Notoriety/extent to which brand is well-known
   • Risk of cancellation, priority, dilution and the ability, or willingness, or both, of the owner to enforce legal rights.
   
3. Sourcing and use of quality data and assumptions
   Reliable data for the completion of this monetary brand valuation is obtained. Including available data. Including data available from the brand owner and third parties, such as Google Analytics, accountancy, etc. All data obtained will be thoroughly assessed to relevancy, consistency and adequacy.