Valuing Intangible Assets: What Are Your Brand and Ideas Worth?
If someone asked you to figure out your company’s value, you might start thinking about what the business owns that you can see and touch: tangible assets such as real estate, machinery and inventory.
But depending on your industry, much of a business’s true worth lies in its intangible assets. These include everything from your brand reputation to intellectual property to customer relationships.
It might seem odd to slap a value on something intangible. But doing so is critical for attracting investors, securing loans, negotiating mergers, even managing your taxes. But because of their less corporeal nature, many business owners underestimate (or even entirely overlook) them.
Read on as we discuss intangible assets, discuss the various types and examine how professionals determine their value.
What Are Intangible Assets?
Intangible assets are non-physical resources that add measurable economic value to your business. They might not have a concrete form, but they usually provide some sort of benefit, whether that’s providing a competitive advantage, enhancing profitability or driving long-term growth.
Consider them the “soft power” behind your company’s success.
Typically, intangible assets are broken down into two categories:
- Identifiable intangibles: Assets that can be specifically named, separated and in some cases, even sold or transferred. Examples include patents, trademarks, copyrights and customer lists.
- Unidentifiable intangibles: Assets that can’t be easily separated from the business itself. The most common example is “goodwill,” which reflects the reputation, relationships and other advantages that make your company more valuable than the sum of its parts.
Common Types of Intangible Assets
While every business is unique, most organizations have some combination of the following key intangible assets:
- Intellectual property (IP): Patents, trademarks, copyrights and trade secrets — basically, your innovations, products and creative works, as well as the safeguards protecting them.
- Brand recognition: A trusted, well-known brand can increase customer loyalty, pricing power and market share.
- Goodwill: This is the premium value a company commands beyond its net assets, often built over years through strong reputation, customer satisfaction and operational excellence.
- Customer relationships: Established relationships and recurring revenue streams (such as long-term contracts or subscriptions) are valuable indicators of stability and future earnings potential.
- Licenses and permits: Legal permissions such as government-issued permits, broadcasting rights and software licenses can give a company a competitive edge in its industry.
- Non-compete agreements and employment contracts: These might not generate direct revenue but can protect a company’s market position and workforce stability.
These assets may have enormous value to your business. But many of them won’t appear on your balance sheet unless they were acquired in a purchase.
That’s one reason business valuations — especially for transactions like mergers, acquisitions or succession planning — require a specialized approach to assess their full worth.
Why Intangible Assets Matter
Over the past few decades, intangible assets have taken center stage in business valuation. That’s in large part because of the continued emergence of technology as one of the biggest parts of many countries’ economies. But intangible assets are also significant in many service-based sectors.
For example, a boutique design firm’s value lies primarily in its creative reputation and client relationships. A software startup’s primary assets may be its proprietary code and brand visibility. And a local restaurant’s worth could hinge on its loyal customer base and positive online reviews.
In the U.S., “intangible assets make up 90% of the total enterprise value of the top 15 firms, underscoring their role as the primary driver of corporate value in the world’s largest economy,” the World Intellectual Property Organization wrote earlier this year.
Ignoring intangible assets doesn’t just understate your company’s value. It can also lead to misinformed decisions in pricing, tax reporting and strategic planning.
How to Value Intangible Assets
Valuing intangible assets is both an art and a science. Because they don’t have a fixed market price or physical presence, professionals rely on several established methods to estimate their worth:
These are the three most common methods:
- Income method: Estimates the value of an intangible asset based on the future economic benefits it’s expected to generate. For instance, the value of a trademark might be determined by projecting the revenue it helps bring in and discounting those earnings to present value. This method is frequently used with intellectual property.
- Market method: Compares an asset to similar intangible assets that have been sold or licensed. This can be challenging given limited comparable data. But it’s also based on real data, so it can still be useful when valuing trademarks, patents and other assets for purposes of taxes, royalties and more.
- Cost method: The cost method values an asset based on the cost to create or replace it. This is most useful when dealing with assets whose economic benefits are difficult to quantify.
The need to value an intangible asset might come up more often than you realize. For instance, properly valuing intangible assets helps to determine a fair purchase price during M&A, plays a role in litigation or dispute resolution, provide equitable asset distribution in estate or succession planning, and might be necessary to comply with accounting standards for financial reporting.
Even outside of these formal events, periodic valuation helps business owners understand their company’s evolving worth and identify where to focus investment, whether that’s in strengthening brand equity, expanding IP protection or building deeper customer relationships.
Get the Full Picture of Your Company’s Value
Your company’s worth goes far beyond what’s on the balance sheet. Understanding (and accurately valuing) intangible assets like your brand, intellectual property and customer base provides a clearer picture of your business’s real potential.
McManamon & Co. can help you uncover and measure that hidden value. Our experienced business valuation professionals work with small and midsize companies to assess both tangible and intangible assets, providing insights that support growth, planning and smarter decision-making.
Call us at 440.892.8900 or contact us online to learn how we can help you understand what your business is truly worth.
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