How much is a brand worth?
Indonesia has become one of the center points of Asian economic growth. As such, the country’s favorable economy has attracted many foreign investors to seize opportunities by means of investing in various sectors, from infrastructure, finance, consumer goods, to technology.
The growing economy has also led to the emergence of local investment firms, all of which have capitalized on the many sectors that Indonesia’s rich resources have to offer.
In many cases, investors are perplexed with circumstances where they have to make such decisions as to whether or not to acquire the business of their interest.
Regardless of the business transactions they engage in, business players will agree that the value of a brand can determine where the business is heading. In other words, a good brand has the potential to drive a business forward.
At a glance, a brand looks like a simple thing. In many cases, it only consists of a few words, or even one word. But a brand is very powerful. And in some cases, the brand of a business can be worth more than a product or service than a particular business has to offer.
There is a question that people may wonder. “How much does a brand cost?”
The answer really depends on how you value your brand before you sell your product or service. A strong and sustainable business is not only driven by what is only in the balance sheet. But the brand of a particular business should also be highly considered as an engine that propels the running of the business.
Not only does the brand create awareness that usually stays in the minds of consumers, but the brand also has the power to drive consumer purchase intent. In other words, a brand can increase a company’s profit.
Apple brand is a good example. The brand has contributed to a high market share in the global market. Apart from the quality of the products per se, what makes people prefer the Apple brand for their laptop and/or smartphones is simply because it’s Apple.
Do you know how much the Apple brand is worth?
In early February 2014, Brand Finance Global 500 put Apple in first position, as the brand was said to be worth US$104 billion. Yes, this amount is just for the brand itself. The clear crystal reason is simply that the Apple brand is what has seen this gadget giant climb to the top of the IT industry.
The next question is how do we figure out the value of a brand? There are various approaches used to estimate how much a brand is worth. But this article will highlight the most known approach, which is the royalty relief method.
This ISO certificate method determines the value of a brand based on how much a company would be willing to pay the license of its brand, as if the company did not own its current brand.
The royalty relief method involves an estimation of a company’s future revenue attributable to the company’s brand. Then, the method calculates a royalty rate that would be charge for the brand’s usage.
In deriving the figure of how much a brand is worth, the method only estimates the future value of a company’s brand. So, the method does not reckon either past or present.
There are other aspects that also need to be considered, such as brand strength, revenue forecast and royalty rate.
All in all, using such an approach as a royalty brand method would help investors and/or companies create the bigger picture of the brand or entity they plan to purchase or establish.
It is essential for a smart investor to have an eagle view on seeing a business outlook. And a strong brand can undoubtedly help the investor drive the business forward.
The writer is deputy managing director of Brand Finance Indonesia.
red = past tense
yellow = present tense
purple = future