Intangibles Can Boost The Price Tag of Your Business

Companies own a variety of physical assets, such as buildings, computers, vehicles, equipment, inventory…things that can be seen and touched. But consider the value of those assets that are not normally on your balance sheet, and can’t be seen or touched….intangible assets, and the important role they play in the valuation and sale of a business. They add to the future worth of the business, so it’s important that you leverage them to make your company more attractive to buyers.

Now more than ever, the value of intangible assets, such as people, expertise, relationships, special knowledge and intellectual property can be a greater proportion of the business value than the value of tangible assets. The creation and management of these assets can be essential to long-term success.

You can highlight or improve the value of your company’s intangible assets by:

1. Identifying them – a list of examples follows, but don’t limit yourself. New ones are continually being created, expanding the definition.  Any resource that creates a certain economic benefit constitutes an asset.
2. Documenting the impact of each – how does it generate bottom-line outcomes? Demonstrate its worth. For example, sales tied to proprietary processes show the dollar value of specific pieces of intellectual property.
3. Standardizing Systems & Processes – buyers can be intimidated if they don’t think they can use your intangibles to achieve similar results, so standardize and document the use to show how they will exist after you leave the business.
4. Developing Them – Plan ahead and create new intangibles and increase the value of those that already exist. You can make the intangible more tangible, for example, by obtaining a patent on a proprietary process.

The key is to understand the value, manage it, and convey that understanding to potential buyers. The better you convey it, the higher premium you will receive when you sell the business.

Following is a list of examples of intangible assets:

This list is just the beginning. You know your business and industry well, so discuss any other ideas you have with your advisor.

Assigning value can be challenging, since it can be somewhat subjective. Consult a valuation expert who is well-versed, so you don’t invest time and money into those that contribute little to value and sale price. If you would like more information or advice on valuing your intangible assets, contact Mike O’Malley at 913-648-0185 or michael@ok-om.com.