A standard for brand valuation

How do you put a value on your brand? The world’s first standard on brand valuation is set to help.

Most people can recognize a strong brand when they see one - it’s authentic, different and relevant. Research suggests that up to 80% of a company’s stock-market value is now attributed to intangible assets. But how do you put a price on such an intangible asset?

An international (ISO) standard in the making will enable organizations to do just that, providing a consistent, reliable approach to brand valuation.

The ISO standard has been developed by a raft of international committees comprising industry experts in several markets including the UK with input from BSI, the UK’s national standards body. With no commonly agreed method for performing a brand valuation, the new standard specifies the requirements for procedures and methods of monetary brand value measurement. BSI is now calling for comments on the draft standard from all interested parties.

Aimed at both brand consultants and finance and marketing professionals, the standard could also be used by companies wanting to review their brand portfolios in order to identify growth opportunities and allocate resources. Publication of the final standard is expected in summer 2010.

General requirements of the standard include transparency of the process, which will allow organizations to better understand the methods used in valuing their assets and increase confidence in the services offered by brand consultants.

The draft standard specifies three approaches to brand valuation:

• The Income Approach which measures the value of the brand by reference to the present value of its economic benefits
• The Market Approach which measures the value of the brand based on what other purchasers in the market have paid for similar assets
• The Cost Approach which measures the value of the brand based on the cost invested in it.

Valuation inputs include assessments of market data, brand strength (usually based on factors such as awareness and loyalty), brand relevance in its specific market and legal aspects, such as rights.

David Haigh, CEO of valuation consultancy, Brand Finance, said:

"Brands are the largest single source of intangible assets yet, historically, brand valuation has been viewed as opaque, subjective and unreliable - a bit of a black art. The ISO standard recognizes this and attempts to create a consensus on how brands should be valued. The draft standard represents global best practice in brand valuation and marks a huge step forward in a vital area of management concern. I urge all interested parties to review and comment on the draft."

To comment, visit: www.bsigroup.com/draft10668 before 30 September. All comments will be fed back to the UK committee for their consideration and then taken forward internationally.