Difference in Valuation Methods

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.

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