Brand Valuation

Brand - a broader concept than the trademark. If the trademark is denoted by a particular product, a registered public body, the brand - it is the image that arises in the mind at the sight of a trademark. Under the brand most often means a well-known brand, which is associated in the minds of consumers with specific products or services.

In appraisal practice the concept of «evaluation of the brand» is almost never used. The term «brand» rather a marketing concept that characterizes the emotional perception of the consumer of a product. Typically, when we talk about brand valuation, the mean estimate of rights to the trademark (TM) or goodwill (goodwill) of the company. The practice of assessing TM (brand) in Ukraine is in its formative stages, but due to enter the Ukrainian market of Russia and foreign companies, for whom the regular assessment of their brand (TM) - the need to survive in a competitive environment, Ukrainian companies are beginning to pay more attention to the creation and shaping their competitive brands.

Provided that the brand valued and put on the balance sheet, it becomes the intangible assets that can be effectively used: sell, lease (franchises) to contribute to the authorized capital of the newly created company. As a rule, professional assessment of TM is also conducted to determine the damages from its illegal use by third parties. The practice of mergers and acquisitions business, which is gaining momentum in Ukraine, also provides for the use of cost information as businesses in general, and certain of its intangible assets.

Methodological approaches in the evaluation of the brand.

In appraisal practice, there are three approaches to brand valuation: cost, comparative and profitable. The cost approach to the assessment of «brand» defines brand value as the sum of costs for its establishment and registration. But the result of this assessment is not adequate to the true market value of the brand, so the evaluators do not use it practically, except that to determine the lower limit of the range, which will be the final result.

With regard to the comparative approach, it is based on determining the value of the brand on the basis of information about transactions with similar, comparable brands. The difficulty with this approach is the lack of an active market for the sale of brands, as well as, sometimes, in the unavailability of information on prices and the actual conditions of such transactions. This approach is used very rarely.

Typically, brand valuation is used income approach, with a valuation based on discounted (reduced to the current period of time) value of cash flows that a brand can bring us in the future. The income approach involves the use of multiple assessment methods. The most applicable are: the method of relief from royalty method and advantages of profit.

Based on practice, the method of liberation from royalties should be used for buying and selling brand when the brand belongs to the estimated mean business, having in Ukraine the practice of issuing franchises. These types of businesses include trade in consumer goods (clothing, footwear, household appliances), food products trade, restaurant business, tourist services and the like.

Information required to assess the brand.

Begins score «brand» (TM) to monitor and analyze the market on which the brand operates. Taken into account everything from the characteristics of re-entry into the market and ending with a competitive advantage «of our brand». Further analysis of financial condition of the company-owner, it is desirable to examine the financial results for the last three years of business activities on the basis of this forecast is based income from sales of goods valued under the brand name for the next three to four years. The projected value of future earnings should lead to the current period of time, it is done by the discounting. Discount rate should be possible to consider all possible risks. The size of risk is determined on the basis of some earlier investment attractiveness of the market and the financial condition of the enterprise, on how exactly it will be defined, determines the final result - the market value of the brand. And because he is determined, usually by expert, experience and professionalism of the appraiser in this case plays a crucial role.

Features assess brand.

Determination of the cash flow generated from the use of a trademark, in most practical cases, is a fairly complex analytical problems. If a company has in its arsenal several brands, in the assessment of one of them needs to allocate a separate revenue generated by sale of goods under this trademark. Application of mathematical methods that are gaining popularity in the western business valuation, to the evaluation of national intangible assets yet difficult to apply. The development of this area of assessment, of course, must go to minimize the use of indicators identified by the expert, the use of indicators related to the analysis of market data. It will be possible with greater openness and accessibility of information on transactions with TM.

Benefits for the company in evaluating brand

Determining the value of the brand gives the company the indisputable advantages. First, it is an opportunity to attract the necessary financial resources, and secondly, to generate an optimum capital structure of the enterprise. Inside the company, the cost of the trademark is used by managers in making marketing decisions, as well as in analyzing the performance of the enterprise. Knowing the value of a trademark, a manager can objectively assess the results of marketing service companies to build and improve the perception of the trade mark user.

• The cost of brand valuation is specified in each case and depends on the following factors:

  • type and composition of the object of evaluation;
  • complete and accurate information available to customers need information about the object of evaluation;
  • timing of the order.

RENTA GROUP company evaluates brands on the basis of Certificate of State Property Fund of Ukraine No 5688/07 of 20.04.2007. Experts of our company have many years practical experience Assessment brands.

Brand valuation is carried out in accordance with procedures as determined by the current legislation of Ukraine, based contract with the customer. The results of the work is made evaluation report of the brand, having full legal force to the participants in the transaction and the users of the report.