Brand value and brand valuation define how a brand contributes to a company's overall worth. This is going beyond tangible assets like products, patents, or property.

Understanding your brand’s value allows companies to tap into intangible advantages, shape strategic decisions, and maximize long-term growth. In this article we share 5 common examples of brand valuation requests.

But first: What is Brand Value?

Brand value initially refers to the perceived value of a brand in the minds of customers, employees, and stakeholders. It encompasses the emotional and psychological connections people might have with the brand, and how much they are willing to pay for its products or services. A strong brand value can lead to higher customer loyalty, premium pricing, and an easier entry into new markets.

So, What is Brand Valuation?

Brand valuation, on the other hand, is the process of quantifying a brand’s financial value. It is a formal assessment that assigns a monetary figure to the brand's name, or symbol or logo.

Methods such as

are commonly used to determine how much a brand is worth in financial terms. They are used to help understand the economic standing of a brand in the marketplace.

Unlike the most commonly used methods, which are primarily developed from an accounting perspective as part of business valuations, we use a method developed from the perspective of branding and brand management. We call this the Isolated Brand Valuation method©.

Find out more about the differences between the most commonly used brand valuation methods.

Why Should You Measure Your Brand Value?

Why would a company or entrepreneur want to know the value of a brand? We give you five most common examples:

1. Legal dispute regarding trademark usage, such as in a MBO (Management Buy-Out), where according to the departing party, a trademark may no longer be used.

Case: A departing restaurant owner does not want the restaurant's brand name to be continued. The other co-owner, who wants to keep operating the restaurant under the same name, is willing to settle this demand financially. To determine the amount for this buyout, a brand valuation is needed. The result of this valuation can help establish a well-founded buyout amount.

2. As part of a valuation of assets in a bankruptcy.

Case: When a company is declared bankrupt, the value of its assets is still assessed. A brand, especially one that is strong and has built a good reputation, also holds value. However, this value is often still determined to be … nothing! By calculating the value of a brand, one can better understand the (residual) value that can be attributed to it.

3. In determining which brand to retain and to invest in within a brand architecture.

Case: Sometimes, after multiple acquisitions, the platform company is stuck with multiple brands. Questions that may arise are 'what to do with the brands: merge them to one, or keep them as is?', or 'is one or more brands appropriate to continue as a proposition?' In these cases, brand value assessment is essential in order to make a well-founded choice.

4. For use as collateral for financing.

Case: Business owners are always looking for opportunities to expand or to grow their business. Often, additional investments are needed, but how do you secure a substantial amount? To secure a loan, collateral is always required, depending on the amount to be borrowed. A brand can serve as such collateral, provided it is correctly valued and validated.

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:

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.

There is a difference in valuation methods. The Discounted Cash Flow (DCF) method, Premium Pricing method, and Relief from Royalty method are three distinct approaches used in business valuation, particularly in the context of intellectual property or intangible assets. But there’s a new method on the market: the Isolated Brand Valuation© Method.

While DCF focuses on future cash flows and their present value, the Premium Pricing method emphasizes the premium a buyer might pay for specific advantages, and the Relief from Royalty method calculates the value by considering the cost savings associated with owning an asset rather than licensing it.

The latest and newest method we developed and named Isolated Brand Valuation©, separates a brand from a company and uses specific metrics to determine the value of that brand.

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Difference Between Valuation Methods

These are the differences in valuation methods:

Discounted Cash Flow (DCF) Method

The DCF method is widely used for valuing businesses, projects, or assets by estimating their future cash flows and discounting them to their present value. In the process of DFC, forecasted cash flows are determined, and a discount rate (usually based on the cost of capital) is applied to reflect the time value of money. The present value of these future cash flows represents the estimated value of the asset.

The DCF method is versatile and can be applied to a wide range of assets, including businesses and intellectual property, but not sec brand equity.

Premium Pricing Method

The Premium Pricing method focuses on determining the premium or price increase that a buyer might be willing to pay for a product or service due to specific characteristics, advantages, or synergies. This method involves identifying and quantifying the premium associated with unique features, market position, or strategic advantages of the asset. The premium is then added to the baseline market price or value.

Premium Pricing Method is often used when valuing unique products or services that have a competitive edge, brand recognition, or other differentiating factors. With brand recognition, it touches brand valuation at the surface, but misses the metrics the Isolated Brand Valuation method uses for the best brand valuation.

Relief from Royalty Method

The Relief from Royalty method is commonly used for valuing intellectual property or intangible assets by estimating the cost savings attributed to owning the asset rather than licensing it.

This valuation method involves determining the hypothetical royalty payments that would be saved by owning the asset internally instead of licensing it. The present value of these cost savings represents the estimated value of the asset. This is particularly relevant when valuing patents, trademarks, or other intellectual property where licensing is a common practice.

Isolated Brand Valuation© Method

The Isolated Brand Valuation Method is developed to make one of the most important intangible asset of a company – and perhaps the most underappreciated value – tangible. This method isolates the brand to be valued, and computes the equity of this single brand using up to 12 metrics all directly related to one brand, divided into 3 categories:

  1. marketing effectivity and loyalty,
  2. legacy, propriety and image,
  3. financial input and share.

The used metrics are a combination of (e.g.) legacy, proprietorship, penetration rate, growth ratio, marketing budget spent, and other metrics. The outcome of the Isolated Brand Valuation© method is a substantiated value, which can be used to determine the full equity of a brand.

When Tesla communicates it has managed to capture the market to an extent of 22% of the car users use an EV, does this indicates a good market penetration rate or a strong market share?

There is a difference between the two.

If 1,000 users are willing to buy EVs and Tesla manages to sell 300 of them, this could indicate that it has a penetration of 30%. On the other hand, if the net revenue generated from the EV industry is one billion and Tesla’s revenue adds up to 4,500,000, it indicates a market share of 45% in the car market.

See the difference? In this article you’ll find answers to the topics such as:

And additional: 4 reasons why you should enhance your market penetration

Importance of Market Penetration in Brand Valuation

We use a metric as market penetration rate, because the size of realized sales (offset) compared to potential sales says something about the (geographical) reach of the brand and brand recognition.

Market penetration is the way of maximizing sales through existing products or services without having to change them. As the market is known territory for a company, it minimizes risks siginificantly.

So, the number of sold products or services divided by total addressable market (TAM) x 100 makes the right market penetration rate.

Penetration rate and Brand Equity: The size of realized sales compared to potential sales says something about the (geographical) reach and brand recognition.

What is a Good Average Penetration Rate?

The average market penetration rate is different for each market. Market size and product adaption both have a direct influence on the market penetration rate.

Markets that sell products and services to consumers tend to be bigger in offset and smaller in revenue. Small, Medium and Large-sized and even corporate enterprises on the other hand, often have a smaller sales market, but gain higher revenues.

Also, product or services that are very specific and/or not that easy to adapt, like actuators, or film festival software, grow slower in penetration rate.

Although determining a market penetration rate can be difficult, there are some generalized parameters as a reference to provide you a rough guideline. These are:

Before you start calculating your market penetration rate, the size of your company’s total addressable market (TAM) must first be estimated. Tracking your company’s market penetration helps to assess its competitive standing relative to its competitors. The company’s current market penetration can also be insightful in understanding the upside remaining in the market.

If the potential to capture additional market share is limited, then the company might need to consider expanding into different markets to reach more customers.

Effects of market penetration in building your brand

Knowing your market penetration rate can be key in expanding your business. You'll get a better understanding of your position relative to the competition and need it to valuate your brand value. We give you 4 reasons why you should enhance your market penetration.

Faster reach of the tipping point
A single person can start an epidemic of the flu, so too can a small but precisely targeted push cause a fashion trend, the popularity of a new product, or a drop in the crime rate. Malcolm Gladwell wrote about it in his book “The Tipping Point: How Little Things Can Make A Big Difference”.

The tipping point is the moment when an idea, trend, or social behavior crosses an important threshold and spreads like a virus.

Future prospects
If a firm manages to engage and retain its customers, they also have the opportunity to sell them any new products or services in the future. Market penetration provides that insight.

Fast growth
Good quality attracts customers. When a brand has a reputation of delivering good quality, customers are willing to come back. Word-of-mouth is kicking in, the reputation spreads quickly in the market. Good quality is the quickest way to amplify the customer base and establish one’s presence in the market.

Easy diffusion in the market
A strong market penetration helps to make it easier to reach larger masses. People start noticing the brand and they might shift to a new product or service quickly.

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