How does a brand increase the value of a business to sell

The brand is one of the most significant and valuable intangible assets of the company. It can help you attract and retain customers, build loyalty, and increase your business' bottom line. Many companies have succeeded in managing their brands, greatly increasing their value and the value of their business as a whole.

When selling a business, the buyer may be interested in the brand of the company and is willing to pay extra money for the right to use this brand in the future. This may include the right to use a trademark, logo design, packaging, advertising, etc. The value of a brand can be assessed based on its recognition, customer loyalty, prestige, the associations it evokes with consumers, and other factors.

Brand management should be included in the company's development strategy also in the future. Otherwise, the value of the brand in the market and among consumers may decrease, which will affect its value in the sale. Therefore, in order to maximize the value of the brand, the company must pay attention to its support and development throughout the entire period of its activity.

What is a brand?

Today, a brand, in addition to recognizable and legally protected symbols of a product or company, also means a set of information associated with them, the attitude of consumers and other target groups.

James Gregory, author of books on corporate governance, believes that the – it is not a product or a company at all, but mental constructions, the sum of a person's experience and his perception of a product or company.

High consumer confidence in a product significantly increases its value and makes other companies pay billions for the desire to have a successful brand.

So, what is a brand? To date, there is no single precise definition of this concept. Some people confuse the concept of brand and trademark, considering them identical. But it's not.

Trademark — these are separate elements or their complexes, which enable the consumer to quickly recognize the product among many similar ones. Brand (that is, a set of ideas) and a brand (distinctive mark) are connected by a special psychological reaction of involuntary memory, identification.  In other words, when the consumer encounters the brand, the process of "activation" is launched; consumer's ideas about the product, laid down by all his previous experience.

A trademark becomes a brand when it has added value that people are willing to pay more for.  That is, the brand — a trademark that was worked on not only by a team of designers, copywriters, but also brand strategists. And if the trademark refers to the goods of the company, then the brand — to the whole presence of the company and its offers in the market.

A brand will be successful when the consumer sees in it a special value that best meets his needs and desires and thanks to which he will prefer this particular (under this brand) product or service among many similar ones on the market.

Brand impact on consumers

A brand can be an effective tool for influencing all counterparties of a company. It includes information about the quality, uniqueness (differentiation) of a product or service, its necessary or desirable properties. The brand signals to the consumer about receiving additional value in case of purchasing this product or service. Also, suppliers and distributors in the presence of a well-known brand in the company see increased sales guarantees and the possibility of obtaining higher margins. Working for a company that owns well-known brands develops staff pride in their involvement in the brand and increases their motivation. In relations with the state, the brand can become an object of national heritage or receive certain advantages in the form of tax incentives, government orders, etc., as an enterprise important for the economy and cultural development of the country.

A brand is also a unique long-term competitive advantage. It may require significant financial and intellectual investment to create it, but at the same time, the brand is an asset with an unlimited lifespan. The consumer loyalty that a brand creates is long-term. It can exist, gradually decreasing, for a long time, even if the company does not pursue any supporting strategies.

Brand as a valuable intangible asset

A brand can indeed become a valuable intangible asset for a company. It is a unique combination of name, logo, design, slogan, values and identity that sets the company and its products apart from the competition.

A strong brand can be a valuable asset because it can help a company attract and retain customers, set pricing, and even protect the company from competition. In addition, a brand can help a company expand its business and create new products or services.

For a brand to be a valuable asset and add value to your business, it must be recognizable by consumers. This can be achieved through a long-term marketing and customer retention strategy, as well as through the creation of quality products and services.

According to Forbes, the world's top 100 brands are worth $2 trillion.

The first on the list and the most expensive brand in the world as of March 2023 is Apple. Today, the company's emblem is probably recognized by many people, because experts from rating agencies estimated the Apple brand at $ 355 billion.

The search network Google is known to almost all users of the global Internet. This made the Google brand one of the most expensive in the world ranking. Its value is estimated at approximately 263 billion dollars.

The most expensive brand in Russia (according to Brand Finance) is Sberbank, which is the top brand in its field.

That is, well-known brands such as Apple, Google, Sberbank, Nike, Coca-Cola, Amazon and others are examples of companies that have invested in their brands and created valuable intangible assets that help them advance in the market and dominate their industries, as well as significantly increase the value of their shares and business as a whole.

Thus, the brand — it is an intangible asset capable of generating and attracting additional cash flow.

Brand Valuation Methods

Brand valuation is an important part of the business sales preparation process. There are several brand valuation methods that can be used to determine brand value in the context of selling a business:

• Income method. This method is based on calculating the current and future value that a brand can generate and applying discounting to expected future revenue streams to arrive at a net present value. This method can be applied if the brand has clear sources of income and growth potential.
• Cost method. This method is based on the calculation of the costs of creating and promoting a brand, including the costs of advertising, marketing, packaging, etc. The brand value is then estimated as the difference between the cost of creating and promoting a brand and the cost of creating a similar brand at present.
• Comparison method. This method is based on brand comparison with other brands in the market. For this, data on sales, reputation and other indicators of brand success are used. This method allows you to assess the relative position of the brand in the market and its potential value when compared with others.

How the brand affects the value of a business when selling

A brand can increase the value of a business when selling due to the following factors:

• Brand awareness. The more people know about a brand, the more it is worth. A well-known brand can attract more customers and generate more revenue, which increases the value of the business.
• Customer loyalty. If a brand has a large number of loyal customers who regularly buy its products or services, then this can increase the value of the business in the sale. Loyal customers can move to a new business owner, which guarantees a stable income.
• Quality of products or services If a brand is known for its quality of products or services, this can lead to higher business value. Quality products or services attract more customers and improve brand reputation.
• Brand reputation. Brand reputation is one of the key factors that can add value to a business. A good reputation guarantees the trust of customers, partners and investors, which can increase the value of a business.
• Intellectual Property. If a brand has registered trademarks, patents, copyrights, or other forms of intellectual property, then this can increase the value of the business when sold.
• Business scale The larger the business, the higher its value. If the brand has a high level of scalability, then it can increase the value of the business.

Sometimes rebranding is also carried out after the purchase of a ready-made business. For example, when brand performance in the consumer market is falling, and there is a need to increase the profitability and venality of the business, as well as form a new strategy to promote the company. Rebrand — it is a redesign or rethinking of the brand. It is needed when a business needs to report major changes, such as the sale of a company, a merger, a name change, a change in the main audience and a new strategy, which is very important today with the imposition of sanctions and the withdrawal of world brands from the Russian market.

Thus, when selling a business, you should definitely take into account such an important and valuable asset as a brand. This is especially important when forming the pre-sale packaging of the business. And if the company does not have a recognizable brand, then before the sale it is worthwhile in advance, preferably at least 6 months before the sale, to start working in this direction. To carry out the whole range of work on packing your business before selling, including company branding, it is worthwhile to involve specialists from the Russian-Eurasian Business Broker REAB. Our team will help you professionally prepare your business for sale, including its branding.