Repeat after me:
“The brand is a company’s most valuable asset … and the only asset that appreciates over time.”
It’s worth saying it aloud a few times. Because driving up brand value is the least expensive and most assured way of increasing the overall market value of a business.
Your brand, unlike your tangible assets, will never depreciate. Your brand, unlike your patents, will never expire. Your brand, unlike your copyrights, will never pass into the public domain. Your brand is yours to keep and grow – forever. If you are the owner or manager of a brand asset, it is your job to define your true brand promise, to communicate it to every corner of your market, and to empower your employees to deliver on it. Do this and your brand will grow like wild vines. Fail to do it and your brand will wither and, possibly, even die. You owe it to yourself and everyone who counts on your organization to do everything possible to drive up the monetary value of your brand. Driving up brand value all but guarantees more multiples when it comes time to exit the investment.
In the US, a mature corporate brand can represent up to 70 percent of a business’s overall value. Put another way, if the CEO mishandles the organization’s brand, he or she will have squandered up to 70 percent of the organization’s potential market value. Most CEO’s, especially the entrepreneurial ones, don’t know this. Otherwise they’d be tempted to spend 70 percent of their time working on their brand. Instead, they focus on other worthy aspects of the job – research, finance, people, etc. All necessary functions, of course. But, when it comes time to drive up the value of the company, nothing is as cost-effective and quick as the development of, and adherence to, a sound brand strategy.
Many executives find it hard to believe that brand value can add so much to the overall market worth of a company. Business people tend to rely on cold, hard numbers. They believe that, if you can’t measure a thing you can’t manage it. And if you can’t manage it, it has no real value. But brands can be measured. And, when you compare them to tangible property and other kinds of intellectual property, they measure up pretty well. International brand valuation firm, Brand Finance, Plc, conducts an annual worldwide study that shows intangible assets account for between 60% and 80% of a company’s capitalization. See chart below.
In the US, the study is performed on the Standard & Poor 500 and reveals that, year after year, on average, brand value accounts for 68% of the total worth of the listed company. Other kinds of intangible assets, like patents, copyrights, licensing agreements, etc., represented 10% of overall value.
It’s true that some B2B businesses may not enjoy the same high brand valuations. For example, the one-time titan General Electric has seen some hard times and has fallen to number 33 on the Fortune 500 list. It has a brand value that’s only 13% of the entire company valuation. But 13% of GE, even today, is still 9 billion dollars. Traditionally, GE had a relentless focus on brand-building because they understand how their brand drives awareness, interest, demand and, ultimately, revenue. Plus, who wouldn’t want to have an extra $9 billion on the books?
So, readers, how much is your brand worth? How much more valuable would it be if, like the leaders in every market sector, you understood your true brand promise and worked diligently to deliver on it every day? Financial markets regard a strong brand as a premium asset. They reward organizations that integrate a clear brand vision into their everyday business operations. Buyers are willing to add multiple after multiple as they see a target business’s brand gain strength. And, again, the fastest way to gain that strength is through brand strategy. Business leaders who neglect to invest in effective branding strategies leave money on the table – as much as 70% – when it’s time to exit.
BEST BRANDING READS – WEEK OF MARCH 15, 2021
What’s Mine Is Ours: How Consumption Is Changing
Brands must be prepared to become commoditized? Really? Intriguing article.
Car Buying and the Measure of a Corporate Brand
To quote: “People create experiences, and experiences make or break a brand.”
Branded Tech Is a Game-Changer for the Auto Industry
I dunno. How complex a computer do we want while driving?
Sex sells: lessons in depicting real women in advertising
In honor of Women’s History Month, a look at the current state of sexism in advertising.
The Unsung Heroes Of Business Strategy
Let’s raise a glass to those who ask the right question.
Defining Your Brand Voice
It’s not just what you say. It’s how you say it. Great examples here.
Understanding Today’s Luxury Consumer
Will we ever truly understand the luxury consumer?