Archive for 'SME’s'

Intangible Assets and SME’s…

April 19th, 2012. Published under Intangible asset strategy, Managing intangible assets, SME's. No Comments.

Michael D. Moberly   April 19, 2012

For management teams and senior leadership of SME’s, there may be few better uses of one’s time, particularly in this increasingly knowledge-based and intangible asset driven global economy than to ensure those intangible assets are being effectively managed, profitably exploited, and firmly embedded in the company’s operating processes and culture.  Management teams unfamiliar with or reluctant to engage their intangibles will find this a prudent and much needed undertaking that can produce enterprise-wide benefits.

SME management teams who have already achieved operational familiarity with intangibles recognize those skill sets can produce numerous benefits, not the least of which is to serve as a starting point to elevate the probability a company will not merely experience mediocre success, but stand out in their market space and among competitors by…

  • being innovative
  • sustaining and enhancing their competitive advantages, and
  • effectively and efficiently exploiting (producing, bundling, positioning) other intangible assets.

Respecting the economic fact that 80+% of most company’s, including SME’s, value, sources of revenue, and ‘building blocks’ for growth and profitability today evolve directly from intangible assets, there is, in my view, ample room-opportunity for managerial discretion and maneuverability to make such an initiative not merely worthy of their time, but lucrative and strategically beneficial to their company as a whole.

It’s still fair to say though, respectfully, and there is virtually no evidence to the contrary, that significant percentages of SME founders, owners, and management teams remain unfamiliar with, unconvinced about, and/or disinterested in…

  • the intangible assets their company has developed, produced
  • the contributory value of those assets to particular projects, business units, or the enterprise as a whole
  • strategies to effectively exploit those assets to add value, depth, and sustainability to their company.

That said, it remains nothing short of an operational (business) imperative today that SME management teams seek any and all opportunities to develop a strong understanding and appreciation for intangible assets that include, among other things, methodologies – strategies to:

  • identify and unravel intangibles’ origins, and assess their contributory value
  • promote effective and efficient utilization of intangibles, i.e., leverage them internally, externally, and among stakeholders to influence additional and continued innovation, and
  • exploit them to enhance – secure competitive advantages, reputation, image, and goodwill, and relationship capital, etc.

Unfortunately however, there remain numerous real and perceptual hurdles that, in essence, discourage, even deter some management teams from engaging their intangible assets and related opportunities to exploit those which are internally produced.  This is largely because intangibles are still not consistently recognized or accounted for on a company’s balance sheet or financial statement other than being folded into goodwill which, in my view, falls short of providing SME management teams with a sufficiently strong rationale to aggressively and profitability engage them!

Too, key parties and institutions that presumably would have direct interest in using an SME’s financial reports (if they fully addressed intangibles), i.e., (a.) lenders for assessing asset-backed lending decisions, or (b.) SME management teams relative to fiduciary incentives to (better) manage, use, and exploit their intangibles, are discouraged from doing so, in part due to the (perceived) absence of objective and replicable methodologies to measure the performance and (contributory) value of intangible assets.

Still, the professional – personal incentive a business leader might enjoy from engaging – embarking on an intangible asset focused course of action is a worthy and useful starting point for making many (tactical as well as strategic) business decisions, and certainly for commencing any business transaction, because inevitably, intangible assets will in play in both circumstances.

SME management teams should therefore not overlook, especially in this globally charged knowledge-based economy, the reality that intangibles represent the dominant drivers –  foundations to (company) value, revenue generation, growth, and profitability.

Unfortunately, as noted above, there remain, what some would describe as, real disincentives, which many SME management teams default, as a rationale for not engaging the intangible assets which they have fiduciary responsibilities for managing, overseeing, and stewarding.

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

 

Intangible Asset Literacy: Avoid Being A Management Team That’s Reluctant To Engage Intangible Assets

March 23rd, 2012. Published under Managing intangible assets, SME's. No Comments.

Michael D. Moberly   March 23, 2012

I have found many management teams and business decision makers in SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) are inclined to interpret the phrase ‘knowledge-intangible asset based global economy’ to be more cliché than reality and more relevant to Fortune 1000’s, presumably rich in intellectual property, know how, and R&D.

Frankly, I don’t share those interpretations.  Instead, I advocate this reality…unless and until more management teams, c-suites, D&O’s, shareholders, investors, and other SME and SMM stakeholders recognize:

  • intangibles today comprise 65+% of most company’s value, sources of revenue and building blocks for growth and sustainability
  • the prudence of engaging intangibles through consistent stewardship, oversight, and management
  • the necessity to develop practical strategies to sustain control, use, ownership, and monitor asset value and materiality

such interpretations and perceptions will likely persist.

Should such intangible asset illiteracy persist, two, among numerous potential adverse outcomes will be; significant unrealized (asset) value and exploitation opportunities are left on the proverbial table, and the assets will remain vulnerable to the myriad of economic and competitive advantage adversaries (globally) to acquire and exploit to enhance their company or client.

In a respectful defense of SME and SMM management teams and decision makers though, many lack sufficient familiarity with intangibles or perhaps the inclination today to take the time to try to turn their intangibles into potentially revenue generating assets.  Too, SME decision makers are, broadly speaking, realists and exhibit more aversion to what they interpret as risk, i.e., engaging in a new initiative like intangible assets.  Admittedly, such sentiments may be more central to their decision making and planning during this extended recessionary period in which business futures remain unsteady.

Also, experience suggests, many leaders of SME’s with their inclination for pragmatism, recognize that before embarking on any new initiative, particularly one that departs from what they interpret as being very workable past practices, i.e., engaging intangible assets, three things, at minimum, must be in place (up front):

  1. availability of practical and relevant training that provides sufficient familiarity with intangibles to be immediately useable/applicable with respect to identifying, assessing, and exploiting, i.e., maximizing and extracting value from the assets as sources of revenue, enhancing company value, and/or foundations for growth and sustainability
  2. financial incentives, i.e., specific tax advantages and direct (immediate) financial inducements, etc., and/or
  3. regulatory mandates that require every company to commence reporting and accounting for their intangible assets.

While #1 and #2 above would obviously require legislative action, #3 is essentially independent. That is to say, forward looking – forward thinking SME management teams, decision makers, boards, and stakeholders are obliged in my view, as a fiduciary responsibility, to seek and achieve the necessary familiarity with intangible assets that enables them to successfully engage those assets through effective stewardship, oversight, management, and monitoring practices.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Intangible Assets and Small Businesses

January 9th, 2012. Published under Intangible asset strategy, Intangibles as strategic assets, SME's. No Comments.

Michael D. Moberly   January 9, 2012

According to the Small Business Administration, SME’s in the U.S. are:

  • 20+ million in number
  • deliver approximately 39% of the U.S. GDP
  • and reportedly produce two and one half times as much innovation (intangible assets and IP) per employee compared to larger firms

This leaves little question that SME’s produce and possess intangible assets that deliver value, revenue, profitability, and serve as  foundations (viable building blocks) for growth and sustainability.  It’s now time to believe it, act on it, and reap the benefits!

Obviously, I am a strong proponent/advocate of intangible assets.  With few exceptions, they are embedded in every company, regardless of size or industry sector and after all, it is an economic fact that today 80+% of most company’s value and sources of revenue lie in – evolve directly from intangible assets.

But, why is it that a significant number of SME management teams’ familiarity with – interest in intangibles is sporadic, if not dismissive in terms of understanding…

  • what they are
  • how they’re produced
  • where they exist
  • the different forms they take, and
  • how they can be profitably utilized and exploited

Numerous studies, many referenced in this blog, consistently report that senior executives consider the management, utilization, and risks to their intangibles to be a significant priority.  Unfortunately, those important messages do not appear to be sufficiently resonating with SME management teams and boards to prompt them to take action and literally engage their intangibles.

Perhaps, there lies, at least in part, the crux of the challenge regarding intangible assets and SME management teams and boards, i.e., there needs to be a well-articulated repertoire of business (plan) oriented messages directed specifically to SME management teams and boards, that…

  • bring clarity
  • emphasize universality, and
  • describe efficient strategies to identify, unravel, utilize, exploit and otherwise manage intangible assets

…to enhance a company’s value, deliver new sources of revenue, and serve as foundations (or building blocks) for company growth, profitability, and sustainability.  

Another aspect of the challenges SME’s experience with intangible assets is that for a significant number of SME management teams, their initial exposure to intangibles was literally thrust upon them, sometimes in near ‘crisis-mode’ by regulatory mandates, i.e., Sarbanes-Oxley, FASB, and/or ISO standards.  Of course, compliance with either of these requires significant staff time, the development of new procedures, and most certainly, additional resources and costs.  Too, in today’s highly competitive but still recovering business environment, many SME management teams and boards already have ‘full plates’ insofar as remaining ahead of the recession wrecking ball.

This leaves less time, inclination, or curiosity to explore the variety of benefits that can accrue from the exploitation of intangibles, e.g., to enhance a company’s value, revenue, competitive advantages, and profitability.

Other reasons that contribute to, what I believe are SME management team/board reticence to pursue intangibles beyond addressing regulatory minimums include…a significant percentage of management teams still have limited experience with intangibles and retain a tendency to rely on (their) intuition and past practice business acumen, versus seeking and applying objective tools to quantify and measure  intangibles’ overall  contributory value, and otherwise devise projective (return-on-investment) business plans to justify devoting resources to their utilization and exploitation.

Helping SME’s and start-ups identify ways they can advance their company’s and render it more profitable and sustainable through the effective use of the intangible assets, which in most instances they have already produced, possess, or have acquired, will lead to elevating (intangible) asset performance by unlocking and enhancing their contributory value.

I often believe, however, and respectfully so, the manner in which management teams and board members frame their questions about utilizing and exploiting intangibles…

  • is related to various levels of misunderstanding and operational un-familiarity with either the existence or utilization of the intangible asset side of their business.
  • may not be so much oriented to company specific management, stewardship, and oversight of intangibles as it is seeking a one-size-fits-all…snap-shot-in-time template which they can take for the proverbial test drive in their company

I engage, on a daily basis, the real world of SME’s, which many times include (the SME’s) founders, owners, management teams, and boards who, in the midst of this lingering economic downturn remain somewhat skeptical about ‘quick fixes’ or ‘silver bullets’ particularly when their credit lines have been marginalized or depleted, and even the best articulated and structured proposals for (intangible)  asset-backed utilization and/or lending fall short.

 

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com