Valuing Intangible Assets…

Michael D. Moberly, Principal, Founder, kpstrat

‘the convergence of business leadership attention span with business things intangible’

Routinely, during kpstrat business engagements…clients voluntarily convey frustration – disappointment in conventional methodologies and practices, ala templates, valuators appear to use to assign and report dollar values to their intangible assets, i.e., inputs – holdings of intellectual, structural, relationship capital, brand, attractivity, etc.

During-the course-of an engagement, when an opportunity arises, I may respectfully seek clarity on this matter, i.e., what is the basis for client’s frustration and/or disappointment regarding a previous intangible asset valuation. Routinely they describe it as stemming from…

  1. the valuation, in their judgment, was significantly lower than their expectations, and
  2. valuator appeared to give little, or no credence to describing – differentiating the individual and collaborative roles, materiality, and value of particular – intangible assets, and
  3. the valuator – valuation conveyed little, if any, attention to differentiating the business’s intangible assets insofar as how or whether they contributed to (a.) underwriting – influencing business competitiveness, (b.) revenue generation capacity, and (c.) sustainability relative to particular products and/or services their business offered..

Respectfully, I attribute 1, 2, and 3 above to the reality that some valuator’s respectfully lack, present-day operational level familiarity with business things intangible, outside of conventional valuation, accounting, and reporting rules, techniques, and practices.

Continuing to convey dismissiveness to business things intangible (via business valuations) especially for early stage businesses, research-based startups, and small-medium sized (developing, maturing) businesses, insofar as valuation, is, at minimum, irreverent and conveys misinterpretation of business development and operation which are now, and for the foreseeable future, irreversibly intangible asset intensive and dependent.

Respectfully too, absent operational level insights to business things intangible, which I argue are essential, continued adherence to (asset) accounting – valuation – reporting conventions, I suspect, there is little, if any motivation for business valuators to consider differentiating a business’s intangible assets relative to…

a. their contributory roles and materiality to particular projects, operations, and transactions, or

b. their origin, acquisition, development, exploitation, commercialization, fragility – stability, and risk.

This ‘contributory role and value methodology’ is the approach to valuing business intangible assets I prefer and advocate throughout my work and kpstrat website.

The ‘contributory role and value methodology’ approach is a reasonable and logical path to ensure business valuations include unraveling, assessing, and distinguishing key mission essential intangible assets, e.g.,

  • a business has developed and holds,
  • relative to the assets various contributory role(s), materiality, and value-add to,
  • particular – business units, projects, initiatives, transactions, as well as specific products and/or services
    • absent duplication, redundancy, or subjective embellishment.

For more on this important topic, I respectfully encourage readers to peruse my blog and papers – booklets available.

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