The value of a brand

I was asked this morning about the value of a one-man business, and that led to an interesting discussion about micro businesses in general. In particular I was asked about the value of Intellectual Property Rights (IPR) in micro businesses.

For most micro businesses any IPR will comprise the Trade Mark(s) provided they are properly protected, and the brand image. Occasionally there will be registered designs and copyright manuals and training matter.

Whatever the IPR it only has any real value if it contributes to the profitability of the business. It’s any intangible asset and in assessing the value of a business it, like any tangible asset, is only worth something if it’s generating profit, otherwise what’s the point of owning an asset?

Let’s assume for the moment that a business is making a profit; what’s the value of the brand? Micro businesses can’t hope to have brand recognition like Cadbury or Coca-Cola for example, but what they can do is to mirror the attributes that give big brands their national or global recognition.

They can become recognised as having expertise in their niche market, for making high quality goods, for delivering excellent service, for delivering their goods and services in a timely fashion, and for giving value for money. All of which develops reputation and for a small business that’s the equivalent of brand recognition; being known in your region or niche market as the “go to” business.

Of course the only real measure of value of anything is what someone will pay to acquire it. With a large business it’s normal for most staff to remain in post after the shareholders have sold and gone, and so the skills and expertise remain post-acquisition.

For the micro business, and especially the one-man business this is not the case. But that’s not to say there’s no value in the “brand”. The trick is to work out how to maintain reputation post-acquisition. The new owner has acquired the business’s clients and will want to retain them, and that almost inevitably means an extended handover period, and a deal that’s structured so as to retain the outgoing owner’s commitment throughout the handover.

So, whatever the size of a business brand is an important factor in determining the value of the business.