EXPERT ADVICE
Is Your Brand Valuation Worth Billions?

Is your brand worth a billion dollars today? Maybe yes or maybe no, but it surely is worth something pretty big. At the end of the day, all the work you have put in pushing your name identity and your range of products and services in your marketplace adds up in an abstract space of the consumer's mind, where it acquires some great value.

This equity can be measured as a real, soft asset. It can have a monetary value like that of a certain type of goodwill or particular reputation. Brand identity is something you might not use to pay the bills but can surely use to negotiate a better price in an M&A or sale of the company.

To measure the value, there are many rules, mostly according to the sales volume and how it has increased over the years, monies spent in promotion and advertising, and how the brand has climbed and at what rate. There also are many other factors, like financial performance, customer perceptions and actual market share.

Published Figures

Most valuations are in billions of dollars; otherwise they don't get media attention. Most top brands of any country are often valued in tens of billions of dollars, and unless you gather a team of forensic accountants, there is no way to prove it wrong or to challenge how a US$50 billion brand value slipped to $25 billion and vice versa.

Most high-profile valuations are done without any input from the management and the owners of the brands, as it is done from published figures. Sometimes brand owners get pretty upset as they are moved seemingly arbitrarily up and down the scale against their competitors.

Normally, year after year, Coke, IBM, Microsoft (Nasdaq: MSFT), Disney, Toyota and Gillette are given a combined value of close to half a trillion dollars.

Most people would think that if Coke were to restart its entire branding history, it would easily cost a trillion dollars, as the company marshaled a global country-by-country marketing and branding launch in a bid to repeat its branding success. The brand valuation of Coke is over $50 billion or so, but somehow the total stock value of Coke is still about $40 billion. Strange math.

Let's explore reality.

Brand Name Dilution

A globally protected unique brand with a unique name identity and steady sales growth can be valued by multiplying annual sales a few times, adding in all the advertising and promotional costs spent on that brand from its inception, and adding in expected sales and the value of each client spread over years.

From that, subtract some key things, like competition, lawsuits and other risks, such as possibly losing ownership claim to the brand name and so on.

The bottom line is that you might easily end up with a billion dollar number.

Certain things are very tangible and black and white, such as the brand name and its ownership; simply put, either you own this name outright or you don't.

Most managers try hard to convince themselves that their single trademark filed in the country of origin is sufficient. They ignore the global e-commerce reality. Most CEOs are simply shy to check the dilution of their brand names on Google.

Because less than 1 percent of names are globally protected, the chance is that the entire evaluation is on shaky ground. During any M&A, a price is established on hard and soft assets. Brand valuation is really a soft asset, as opposed to trademarks and intellectual property, which are hard assets.

Imagine, Amazon without its globally protected name identity and URL is just a warehouse with books. E-trade is just an office. What about EBay or Google? The message should be pretty clear.

Recommendations

Management should formulate a small committee and take a quick inventory of issues to calculate some brand value numbers. As long as the resulting valuations are a few times over total stock value, you are doing OK. However, if for some reason it is way less than total assets, then you need to figure out all about your branding and the real issues surrounding the ownership of the brands, names, trademarks and URLs, etc.

Today, branding correctly with the right image and a universal name identity is still a very easy thing to do. All it requires is the right skills.

However, the old mass-advertising model is dead. Now, one-to-one marketing offers extremely unique opportunities to become a viable brand with the smallest budget in the shortest time.

If for some reason your brand is not worth a billion dollars, start the right process today. It won't take long.