Brand as a Multiplier

A good brand is valuable. It is an enhancement to various metrics from customer acquisition to marketing. It is a multiplier for M&A and investment transactions. Why? Because a brand is a quantifiable asset you own, document, and maintain just like you would your contracts or proprietary intellectual property. Most people see brand as an esoteric soft thing, something to pour money into without value to what makes a business run. So how do you determine how much your brand is worth?

Why ISO 10668 Matters

The ISO (International Organization for Standardization) is an independent organization that creates standards to ensure quality, safety, efficiency, and interoperability across technology, management, and manufacturing sectors. ISO 10668:2010 is for Brand. The introduction to ISO 10668 states that: “Intangible assets are recognised as highly valued properties. Arguably the most valuable but least understood intangible assets are brands.” This is important because it moves the Brand from ‘creative asset’ to the balance sheet column. And just like there are GAAP standards for how accounting is done, there are standards for Brand in order for it to become an "investment-grade" asset.

So how do you get good branding?

Branding is not just a logo and some colors. A good brand has strong guidelines that are consistent across internal and external touchpoints; how you talk on the phone, solve a problem, or provide internal feedback. Those are some of the ways a brand is expressed and it is rooted upon your values as a company. Is it a company value to be outgoing or reserved? Is your brand about growth at all costs or about hospitality? Having a defined brand identity, tone of voice, and visual system is the marketing equivalent of having "clean books" and documented SOPs. You can quantify how these established methodologies create proprietary value that cannot easily be copied by a competitor and at its heart, a good brand means efficiency and savings.

Brand Drives Customer Value

Companies don’t run well without customers and both the Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC) metrics are dependent on Brand as it’s the primary driver of loyalty. A high LTV is a brand outcome; it shows that people aren't just buying a product or service, they are subscribing to a relationship as a reflection of themselves. CAC has multiple cost centers from marketing to sales to client service. How fast can your brand get a contract signed in a crowded market place or do they hem and haw over price like you're a slab of meat? Do they see your name and buy? That’s the power of Brand. 

Internal Brand Strength Impacts Company Value

Turnover isn’t just an operations and HR headache, it’s a valuation killer. Do you keep your employees or do they all leave after 2 years? Every time you have to post a position, go through the hiring process, onboard and train a new employee it costs money. The loss of utilization, decrease in customer trust, and the loss of institutional proprietary knowledge are all bad looks for a company. A strong brand supports a strong internal culture and if you don’t have it, a savvy investor will be looking for those future costs and offer less money. Protecting processes and institutional knowledge is important to maintain any M&A investment no matter if the founder stays or not. 

Investors Are Buying Future Potential

If you are looking to sell or grow,  investors and buyers are not just looking at what your company has done in the past, they want to make sure that they are purchasing something that has legs for the future. Someone who is going to invest in a business is looking to see how the future will unfold and grow.  Professor John Roberts states “Academic research shows us that strong market based assets (including brands, customer bases and collaborative relationships) are predictors of market capitalisation growth of the firm” A good brand provides a framework for that growth. It shows that the company’s success isn't tied to the founder’s personality, but to a scalable, recognizable identity.

Build Brand Value Before You Need It

Even if you’re not interested in selling your company today, all small to medium sized businesses should be run as if they were going to be sold. This keeps the house in order, it keeps compliance maintained, the books clean, and the valuation in mind. Sloppy business practices that don’t include brand will come back to bite you in the butt, even if you’re lucky enough not to be audited or sued or lose to a competitor or someone who just trademarked your name.You don’t need to wait to sell your company to make sure that your brand is strong, you should do it now because it will positively impact the efficiency of your entire company.