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How to Evaluate Trademark or Valuation of Trademark?
Valuation of Trademark : Managers and entrepreneurs often ask questions regarding their company’s trademarks. Is my trademark valuable? How to find the value of my trademark? Can my company’s trademark increase the value of my overall business? Answering these questions may not be easy as finding your company’s value may be challenging due to the many valuation methods approaches out there.
DETERMINATION OF VALUATION OF TRADEMARK
It is essential to know that a brand is crucial for every business. The trademark registered by you is known as a commercial brand that supports the development of your company’s activity. To find the value of the company’s trademark, these elements below must be considered:
- Amount invested and budget set aside for marketing and commercial development.
- The geographical (regional, international, national, etc.) reach of your company’s activities.
- Your company’s brand or notoriety of your business.
- Your company’s current and future operating methods and modalities.
- The economic context about the evolution of trademark value in your niche.
The methods used in finding the valuation of trademark are costly. Thereby, the valuation of your trademark should be based on the following:
- Replacement cost
- Marketing, investment, advertisement, and development costs over a specific period.
- The market prices in terms of business transactions.
- The potential future earnings (present net asset value, price premium method, royalty methods, and the rest).
- The market positioning, market growth, product strength, legal protection, brand extension, business potential, brand image quality and notoriety, internationalization potential, etc.
APPROACHES USED TO VALUE A TRADEMARK
Some of the approaches you can use to determine the valuation of trademark, which is part of your intangible assets, are:
1. Market multiples method
This method consists in:
- Collecting financial and accounting data.
- Studying your industry or similar industries – companies with similar business models and sizes.
- Calculating relevant ratios and multiples
2. Market approach method
This is another method that can be used to find the value of your company’s trademark – intangible asset. It is based on the observations done in the market and the actual value of similar brands known via public accounting data and business transactions.
3. Royalty method
This is the third method that can be used in determining the value of your intangible assets, in which trademark is one of them. Before using this method, consider the business, the location, and the reputation of the trademark.
4. Method based on volume premiums or price
This method consists of having the volume differentials a business can benefit from on the services or products marketed under the company’s brand observed and comparing it to similar products or services of other companies.
5. Methods based on cashflows, profit, and income
This method estimates the company’s profits and how branding contributed to it. It assesses income sharing resulting from cash flow and economical over profits or the resulting cash flows.
The article will see different factors considered in valuing a company’s trademark and the various methods to determine the extensive value. So, have an expert appraiser hired to conduct the proper analysis and investigation to give you the best price for your trademark – an intangible asset.