Trademark Valuation
September 6, 2011 5:58 PM Subscribe
How does a small family business estimate the value of its trademarks?
Small, privately-held U.S. company's been in business for almost forty years. Given the nature of its industry, this company's most valuable asset is probably its locally-known service mark. Company has hit tough economic times and is currently considering reorganization. This will require it to estimate the value of its service marks (in the most favorable light--probably using income method) in the hope of obtaining financing that will keep this company off the auction block.
Who would a small company hire to do a trademark valuation? How much might that typically cost? What information is required? Are there online calculators or DIY estimation methods that could give us, in the meantime, a ballpark idea of the service mark's value? (I see a lot of materials for whole business valuation, for which intellectual property assets are just one subset) Finally, if any Mefite has any good advice within this niche I'd love to hear it.
Small, privately-held U.S. company's been in business for almost forty years. Given the nature of its industry, this company's most valuable asset is probably its locally-known service mark. Company has hit tough economic times and is currently considering reorganization. This will require it to estimate the value of its service marks (in the most favorable light--probably using income method) in the hope of obtaining financing that will keep this company off the auction block.
Who would a small company hire to do a trademark valuation? How much might that typically cost? What information is required? Are there online calculators or DIY estimation methods that could give us, in the meantime, a ballpark idea of the service mark's value? (I see a lot of materials for whole business valuation, for which intellectual property assets are just one subset) Finally, if any Mefite has any good advice within this niche I'd love to hear it.
Seconding an accounting firm. The reality is that the trademark is worth what someone (probably a competitor) would be willing to pay for it. If you wanted to get a ballpark idea, have a look at 'business for sale' ads and see what a similar business is worth as a going concern. If can make a reasonable estimate of the worth of the entire business, you can subtract the value of the assets and stock from that and the trademark/goodwill are worth the remainder.
Valuing intangibles is something of a black art and it will be hard to get a definitive figure, but a good accountant or valuer would be able to provide something that the bank will accept. For the purposes of calculating borrowing capacity, the bank may not consider the full value of the trademark/goodwill, though, as they aren't particularly useful to the bank in a liquidation scenario - the value drops to almost zero immediately on a business shutting its doors and the bank ends up out of pocket. They usually try and avoid the risk of that.
posted by dg at 9:38 PM on September 6, 2011
Valuing intangibles is something of a black art and it will be hard to get a definitive figure, but a good accountant or valuer would be able to provide something that the bank will accept. For the purposes of calculating borrowing capacity, the bank may not consider the full value of the trademark/goodwill, though, as they aren't particularly useful to the bank in a liquidation scenario - the value drops to almost zero immediately on a business shutting its doors and the bank ends up out of pocket. They usually try and avoid the risk of that.
posted by dg at 9:38 PM on September 6, 2011
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The other type of firm that comes to mind is an asset liquidator / appraiser such as Hilco or Gordon Brothers.
This is far from my area of expertise, but I suspect the valuation is going to depend on whether or not the IP in question can be compared to assets that have sold in the market. For example, I remember there being a rule of thumb for the value of a given regional brand of beer (assuming average sales of X barrels/year). No assets or inventory or real estate, just the right to brew and distribute beer under a certain name. People "knew" this value because there are a ton of examples of large breweries buying up smaller brands. Unfortunately, there aren't many businesses with such easy comparables.
posted by mullacc at 8:45 PM on September 6, 2011