Brand Valuation – Igaa
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Brand Valuation
  • Brand Valuation

Brand Valuation

Brand valuation is the process of estimating the total financial value of a brand. This involves assessing a brand’s worth based on various factors such as market position, customer loyalty, financial performance, and brand strength. Here are some key aspects of brand valuation:

Factors affecting Brand Valuation
    • Brand Strength: Includes brand loyalty, market share, reputation, and customer satisfaction.
    • Market Position: Involves the brand’s position relative to competitors in the market.
    • Financial Performance: Includes revenue, profitability, and growth potential associated with the brand.
    • Legal Protection: Involves trademarks, copyrights, and other legal protections that safeguard the brand.
    • Geographic Reach: The extent to which a brand is recognized and accepted in different markets.
Why Brand Valuation

When does the need arises

    • Business Buying and Selling decisions
    • Legal Transactions
    • Management Information
    • Raising funds
    • Liquidation
    • Investor presentation/ shareholder report
    • Value Reporting
    • Management Information
Methods for Valuation

Income Based Method

    • Relief from royalty method: This brand valuation method is based on how much the brand owner would have to pay to use its brand if it licensed the brand from a third party. It uses discounted cash flow analysis (DCF) to capitalize future branded cash flows.
    • Excess-earnings method: This brand valuation methodology calculates the earnings above the profits required to attract an investor – which uses the estimated rate of return based on the current value of the assets employed. These excess earnings are assumed to be attributable to the intellectual property, or brand.
    • Price premium method: This brand valuation method is based on a capitalization of future profit stream premiums attributable to a business’ brand above the revenues of a generic business, without a brand.
    • Capitalization of historic profits method: The brand valuation method is based on the capitalization of profits earned by the brand.
    • 25% EBITDA Rule: – It is presumed that 25% of EBITDA is generated from your Brand. Hence 25% of EBITDA is considered for valuation purpose and is discounted at an appropriate discount rate to arrive at the Brand Value.

Market Based Method

    • P/E ratios method: the P/E (price to earnings):- This brand valuation method multiples the brand’s profits by a multiple derived from similar transactions of profits to price paid based on the value of reported brand values.
    • Turnover multiples method: This brand valuation method multiplies the brand’s turnover by a multiple derived from similar transactions.

Cost Based Method

    • Creation costs method:  This brand valuation methodology estimates the amount that has been invested in creating the brand.
    • Replacement value method: This brand valuation method estimates the investment required to build a brand with a similar market position and share.