While conducting early business engagements…it was apparent some clients were disappointed with conventional methodologies for calculating – assigning dollar values to their intangible assets.
Respectfully, I attributed client’s disappointment – dissatisfaction to… valuator’s lack of operational familiarity with a businesses intangible assets in terms of identifying and distinguishing their origin, development, fragility, materiality, and contributory role to specific projects, operations, and/or transactions.
With the intent to mitigate such distraction, to the work at hand…I sought to inject my own (experienced) perspectives to intangible asset valuation. I believed for starters, this would require being respectfully informative and substantially less challenging to apply and argue as being relevant.
Briefly, my approach to the valuation of business clients intangible assets…would encompass, for starters, unraveling and distinguishing the key asset’s contributory role, value, and materiality to a specific business project, initiative, or transaction; which I subsequently referred to (not so ingeniously) as the ‘contributory role and value’ methodology’.
This methodology allows IA’s contributory value (role, worth, materiality, etc.) to be distinguished relative to a business, a specific project, research, and/or a transaction.
The ‘contributory value’ methodology itself, is not quantitative, in the conventional sense. That is, there is no (one-size-fits-all) mathematical equation or formula used here to calculate and ultimately assign dollar value (ranges) to IA’s. Instead, this methodology demonstrates – reveals graphically, how, where, when, and which IA’s affect (business) value, competitiveness, and revenue, and therefore, deliver – possess ‘contributory value’.
The distinctive simplicity of the contributory value methodology is very relevant to circumstances other than transactions in which IA’s are being
bought, sold, transferred, licensed, etc. For example, conducting a contributory value assessment for a business-company, provides leaders and management teams with practical and strategic insights about how, where, when, and which intangible assets are being applied (effectively, efficiently) and if – how they affect value, competitiveness, and revenue as well as lucrative strategies for amending the current situation.
The ‘contributory role and value’ methodology will reveal…far more about a business’s intangible assets (operationally and financially) than conventional, standalone, snap-shots-in-time methods. The latter, in my view, do not wholly address intangible asset relationships, connections, and contributions to building – developing other essential revenue generating – competitive advantage intangible assets.
Preferably, the manner in which I have conceived the ‘contributory role and value methodology’…brings clarity, and perhaps straight-line simplicity, to a business’s intangible asset valuation process. For one, by emphasizing the interactive – collaborative – supportive features, relationships and connectivity to other assets, projects, and transactions, etc.
Another rationale for developing the intangible asset ‘contributory role and value methodology’ is for it serve…as a respectful segue to clients, otherwise, operationally unfamiliar with their intangible assets to better understand and differentiate…
- the how’s, the when’s, the where’s, and the various way’s, which the intangible assets they and their business have developed, produce, possess, and use (individually, collectively, collaboratively),
- to favorably affect and/or translate to value, revenue generation, and competitive advantage.
What’s more, the ‘contributory role – value’ methodology for valuing businesses intangible assets…renders ‘contributions’ more recognizable, measurable, monitorable, and predictive, insofar as…
- their compatibility with a company’s mission, strategic planning, and operating culture, etc.
- the rapidity and repetitiveness which specific risks manifest to adversely affect any-all intangible asset in play.
- evidence of intangible asset compromise, materiality change, and/or value-competitive advantage erosion or dilution.
- executing new product development, launches, and market entry.
- their incorporation into business continuity/contingency (organizational resilience) planning.
- recognizing intangible assets life, value, and functionality cycles.
- a means to kick start enterprise-wide intangible asset intelligent business culture.
Another equally valid reason for companies to apply the ‘contributory role and value’ methodology (product) is…that, for the foreseeable future, only 20+/-% of the stock price of S&P firms, is explainable solely by the content of conventional balance sheets – financial statements, ala ‘book value’. (Adapted by Michael D. Moberly from the excellent work of Dr. Nir Kossovsky, CEO, Steel City Re)
Michael D. Moberly April 24, 2019 St. Louis [email protected] the ‘Business Intangible Asset Blog’ since May 2006, 650+ published posts, read in 137 countries, ‘where one’s attention span, businesses intangible assets, and solutions converge’!
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As always, comments are encouraged and most welcome.