Its no secret why companies like Apple are worth what they are. Looking at recent market shifts, companies that are making their IP work for them, are taking biggest piece of the pie.
Today, profitable businesses have bigger investment in their intangible assets, helping them generate more corporate value and profits.
Yet most businesses don't identify their biggest assets or fail to monetise them.
Lessons lie in the famous IP blunder by a luxury car manufacturer who, after taking over a competitor, realised that they had bought everything but its trademark. This trademark was later sold to another rival company costing the luxury car manufacturer billions of dollars in profit and valuation. Its a bad business decision to not work your IP.
What is IP Valuation and How to Maximize it?
To know how to increase value we must learn how IP is valued. Its not an elusive ghost, covering behind branding or technology. Unlike the conventional industrial model where you had an idea and you started to sell, the IPR model suggests when you have an idea, you simply put it to paper before you sell. Easy no?
Upon doing the above exercise you may find that you have a worthy design, or a valuable trademark. Or even a patentable process or confidential information. That’s Leverage. Post this identification you begin to determine their value.
Some common industry methods to evaluate are:
Market Method: Expression of every IP creates value in the economy. You could be selling your copyrighted book or franchising your trademark. This is influenced by market behavior and is the simplest way to maximise your returns. Bigger the market of your product the more you directly make. You determine the value of your IP by making more sales. High sales, high valuation.
Cost Method: If you could make smartphones of same quality as Apple, your product would have the potential to generate equal value. The hurdle is the high cost of the initial investment. But if you could come up with a way to make and sell apple phones tomorrow, somebody will fund you or buy you out for riches, as your IP is already valued high as somebody else has proven it. High demand, high valuation.
Income Method: Does your IP demonstrate promising cash flows or future estimates based on this cash flow? Income method is a popular valuation based on predicted asset generation vs current market value. At times asset generation could simply be creating liquidity, the limitation being the value of this asset generated. But if you can demonstrate possible asset generation, your IP can be leveraged to gains. High or sustained rewards, high valuation.
Predicted Reach Method: Here we measure the potential reach of your IP. With novel channels of business and interaction, predicted influence is a good indicator of value. Big players want to scoop as many eyeballs as they can. Whether you want to grow your business or sell to king, you should be tracking, demonstrating and leveraging the reach of your IP. High reach, high valuation.
Conversion Method: Ease of business can be a deciding factor for value of IP. New tech has made information, commodities and people more accessible. If you can demonstrate your IP can leverage new logistics to create more value, your IP’s conversion rate is high and is profitable. To exemplify, you stand to make bigger riches if selling a new smartwatch with new watch faces on a subscription model than just selling new smartwatches. The added cost is not that much and the returns can be invaluable. High ROI, high valuation.
Now we know how to value your IP. Lets dive into how to create IP and hence leverage. The easiest way is to come up with an idea whose expression will have any of these: high sales, high demand, high/sustained rewards, high reach, or high ROI.
Dont sigh! With new tech that is easy now.
Every asset can be tweaked to give it a tech edge. Do you have a transporting business? You could have trackable information on all your vehicles and inventory for less than one drivers compensation. Do you sell construction hardware? Get a little QR code for all your lots simplifying locating, stacking and retrieving or giving customers a discount coupon for their next purchase, depending whether you sell B2B or B2C. Do you sell online? Please be wary of the personal data that you process to execute a sale and how that data is protected. Do you have employees who use your space and/or have access to your data? Please get them to sign an NDA with you.
All of these create IP and hence leverage. Even if its not in-house tech, you will rent out a software on subscription model or be an assignee or user and will enter into a suitable agreement. Remember before you sign the dotted line, reach out to your attorney.
Having a valuable money-making proposition is important. And if you can prevent others from using it without your consent you’re sitting on Gold. You can create monopoly, create or enter into a franchise or license model, enhance reputation and trust, leverage a bigger market, make smarter business decisions and safeguard your business while giving its wings. The possibilities are endless.
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Reach out to our Experts for a free consultation on your IP Portfolio Generation and Valuation today and start your journey!
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