The Maximum Value Method

Enhance your client's company valuation by adopting this one change

There are many ways for accountants to calculate a client’s company valuation.

Whichever method, or combination of methods, you usually opt for, adding this one strategy to your current workings will maximise the final price.

 

Making the Intangible Tangible

Whether you use asset-based, market-value, or earning-value approaches when calculating a client company’s worth, these are all largely based on ‘tangible’ aspects.

Revenue, investment, property rights, workforce, and market comparisons can be described by hard data.

But there’s another, equally important aspect of a company that should always play a part in its valuation – the brand itself.

The brand doesn’t need to just be name recognition or clever marketing. It’s the company values, public perception, emotional power, and strength of imagery. All the things that aren’t so easily boiled down to numbers.

While often left out of the conversation for this reason, the ‘brand’ is becoming not just an important company asset – but the asset itself.

Years ago, adverts sold the strength of the product. Whether it was the fastest car, cheapest dinner, or smoothest shave, simple data could back up why consumers should go for one over the other. Now products are sold on the ‘feeling’ the brand provides consumers.

For example, Gillette’s latest advertising campaign wasn’t focused on the product’s benefits, or even the product at all - it was instead about the perception of men in society. Successful or not, this demonstrates the shift towards companies spending big money on building brand perception, rather just than brand or product awareness.

So to get the maximum asking price for your client’s company, it pays to include this perception, and understand how to value this in the first place.

 

How do you Value the Brand?

There’s a saying that your true brand is what people say about you when you’re not in the room. This is also true of company brands, and shows how difficult it can be to put a number to brand value.

There are a few data-based methods to work this out. Customer loyalty, net promoter scores, the cost of trademarks, and the money spent on historical advertising will provide concrete numbers to use.

But feelings are subjective, and feelings towards brands can’t always be identified with numbers – so use words to fill in the gaps.

Gather verbal feedback from consumers on your client’s brand, as well as their propensity to recommend it. Use focus groups for evidence of your client’s brand perception and emotional power.

Scour social media for instances of your client’s brand being discussed, and assess the sentiment attached to it. This can be towards the brand as a whole, a particular marketing campaign, or social cause your client’s company may have engaged with.

Finally, it can also be worth developing further your skills to effectively communicate the verbal story of the company’s brand value, and partner this with your ability to communicate the numbers.

Once the above is added to your already strong grasp of the more conventional valuation methods, your clients’ company value will reach new heights. And if you want to make sure you’re there to profit at the selling stage, read about the fresh approach to upselling here.


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