Intangible economy is here and rising

Learn what your intangible assets are to know how best to unlock them

Intangible assets

Brand equity

The value of a brand in the marketplace. This can include everything from brand recognition and reputation to customer loyalty and trust. Strong brand equity can lead to increased revenue, market share, and customer loyalty.

Helps to increase the value of the business, improve customer loyalty, and reduce the costs associated with customer acquisition.

Copyrights

Legal protections that give the creator of an original work exclusive rights to use and distribute that work.

Copyright can protect software products, prevent infringement, and increase revenue from licensing and distribution. Effective use of copyrights can help to protect intellectual property, reduce risk, and increase revenue via licensing.

Customer database

A collection of customer data that is organised and stored in a way that allows it to be easily accessed, managed, and updated.

Effective use of databases can improve efficiency, reduce errors, and improve decision-making within a business. By using them to store and manage customer data, they allow the business to make informed decisions and improve communication with its customers and suppliers.

Customer loyalty

Degree to which customers are committed to a business and its products or services.

Strong customer loyalty can lead to increased revenue, repeat business, and referrals. Loyalty can increase revenue, improve the reputation of the business, and reduce the costs associated with customer acquisition.

Customer relationships

Connections and interactions between a business and its customers. Strong relationships can lead to increased loyalty, repeat business, and referrals. Effective relationship management can also help to reduce costs and improve efficiency.

Strong relationships can help to increase revenue, improve the quality of products and services, and reduce costs associated with support, development, and procurement.

Designs

The visual and functional aspects of a product or service. A distinctive design can add to your brand assets too.

Effective design can improve usability, customer satisfaction, and revenue. Designs can help to improve the user experience of software products, increase customer satisfaction, and improve revenue.

Distribution networks

How products or services are delivered to customers. These networks can include wholesalers, retailers, and other intermediaries. A strong distribution network can increase the reach and efficiency of a business, allowing it to reach more customers and generate more revenue.

Allows the company to get its products or services to market.

Employee training

Providing employees with the knowledge and skills they need to perform their job effectively.

Effective employee training can improve productivity, reduce errors, and increase innovation within a business. Training helps to ensure that employees have the skills and knowledge they need to develop and support software products. This can lead to better products, faster development times, and improved customer satisfaction.

External contracts

Legal agreements between a business and other organisations or individuals. These contracts can include everything from sales agreements and distribution agreements to service contracts.

Effective use of contracts can help to reduce risk, improve expectation management and performance, and protect IP. Binding contracts also show investors you have secured a path for progress.

Know-how

Practical knowledge and skills required to perform a specific task or job.

Effective use of know-how can improve efficiency, reduce errors, and increase innovation within a business. Know-how helps to ensure that employees have the skills and knowledge they need to develop and support software products. This can lead to better products, faster development times, and improved customer satisfaction.

Knowledge management

Processes and systems used to create, share, and use knowledge within an organisation. This can include everything from documentation and training to communication and collaboration tools.

Effective knowledge management can improve productivity, creativity, and innovation within a business. They ensure that employees have the information and skills they need to develop and support software products.

Marketing databases

Collections of data that are used to inform marketing strategies and campaigns.

Effective use of marketing data can improve targeting, messaging, and ROI. They help to improve the effectiveness of marketing campaigns, increase revenue, and improve customer satisfaction.

Patents

Legal protections that give the owner exclusive rights to exclude others from using an invention.

Effective use of patents can help to protect inventions, reduce risk of competitors excluding you from use, and increase revenue such as by licensing. Effective use of patents can help to protect software products, prevent IP theft, and increase revenue from licensing and distribution.

Proprietary data

Data that is unique or owned by the company that gives a competitive advantage.

Effective use of proprietary data can help to improve decision-making, increase innovation, and reduce risk within a business.

Quality assurance

Processes and systems used to ensure that products or services meet the required standards of quality. This can include everything from testing and inspection to process improvement and customer feedback. Effective quality assurance can improve customer satisfaction, reduce costs, and increase efficiency within a business.

Ensure that software products are reliable, efficient, and free from bugs or other issues. This can lead to improved customer satisfaction, reduced support costs, and increased revenue.

Research results

Outcomes from internal or collaborative research studies or experiments.

Effective use of research results can improve decision-making, increase innovation, and reduce risk within a business. Research in software can improve the development of solutions and technologies, and set the company apart from others by being a thought-leader.

Software

A product or service that is designed to solve a specific problem or meet a specific need. Effective software solutions can improve productivity, efficiency, and innovation within your business as well as for your current or potential customers.

Helps to solve business or customer problems, create novel solutions that are better than others, increase revenue, and improve the reputation of the business.

Source code

The explicit set of instructions that tells a computer how to perform a specific task, in a format that is readable by a programmer.

Access to source code means easier editing and adjustments to software, which means you have more control over what the product is and can be.

Speciality business skills

Unique skills and expertise that are required to operate a business in a specific industry or niche. Effective use of speciality business skills can help to increase revenue, reduce costs, and improve efficiency within a business.

Helps to ensure that the business is able to operate effectively within the software industry. This can include skills such as software development, project management, and marketing.

Standards

Standards are guidelines that specify technical requirements, procedures, or criteria for a specific industry or product. Effective use of standards can improve quality, safety, and interoperability within a business.

Helps to ensure that software products are reliable, efficient, and interoperable with other software products. This can lead to improved customer satisfaction, reduced support costs, and increased revenue.

Supplier database

A collection of supplier data that is organised and stored in a way that allows it to be easily accessed, managed, and updated.

Effective use of databases can improve efficiency, reduce errors, and improve decision-making within a business. By using them to store and manage supplier data, they allow the business to make informed decisions and improve communication with its customers and suppliers.

Supplier relationships

Connections and interactions between a business and its suppliers. Strong relationships can lead to increased loyalty, repeat business, and referrals. Effective relationship management can also help to reduce costs and improve efficiency.

Strong relationships can help to increase revenue, improve the quality of products and services, and reduce costs associated with support, development, and procurement.

Trademarks

Legal protections that give the owner exclusive rights to use and distribute a specific brand asset such as a name or logo.

Effective use of trademarks can help to protect the brand, prevent infringement, and increase revenue from licensing and distribution.

Trade secrets

Confidential information that gives a business a competitive advantage.

Effective use of trade secrets can help to protect confidential information before it becomes other forms of IP, reduce risk of leaks, and increase your competitive advantage. Trade secrets can help to protect software products’ methodologies, prevent copying, and increase security felt by investors.

Valuation Approaches

Intangible Asset Valuation

When valuing intangible assets, there are three commonly accepted approaches to consider: the historic cost approach, which looks at the investment put into developing the IP; the market value approach, which identifies and uses comparable free-market transactions; and the future income approach, which estimates the present value of expected economic returns from the IP. Intanify’s valuation model is built upon AI and the industry best practices from leading valuation experts such as Mathys & Squire.

Cost Approach

The historic cost approach uses the costs incurred whilst developing the asset, appropriately depreciated, to reach a valuation. All expenses related to UK R&D tax credits are eligible for this method, including outside contracts, development costs, and legal registration fees; although research costs are not included. These expenses must be adjusted for obsolescence - that is to say, any outdated aspects of technology that would be removed if it was rebuilt today. Amortisation can be a useful approximation of this factor. Any registered assets gained during the incurring of these costs that have now lapsed should also be deducted from the total. This value is then adjusted to the valuation date (today) using the risk-free rate.

Market Approach

The market value approach uses transactions with similar characteristics and asset types to reach a valuation. It’s often used in real estate and art markets, but due to the variability of intangible assets and the current lack of significant, easily tradeable markets for such assets, it’s often difficult to employ this approach. Our model leverages a technique called royalty benchmarking, based on comparable market transactions, where possible.

Income Approach

There are a number of useful income methods available - our model primarily uses relief from royalties and in certain instances multi-period excess earnings.

The relief from royalties method assumes that owning IP assets, such as trademarks and copyrights, means a company doesn't have to pay royalties to another party for their use. The value of these assets is therefore determined by calculating the present value of the royalties saved by owning them - in other words, the royalty an acquirer would pay in an “arm’s length” licensing agreement to obtain the same rights.

The multi-period excess earnings method is a modified version of the discounted cash flow method. It seeks to isolate the cash flow attributable to the identified intangible assets. First, the cash flow from the sale of products or services that are produced by a variety of assets is forecasted; then those cash flows are adjusted to reflect the contribution of intangible assets by subtracting imaginary contributory asset charges (CACs). This method can be thought of as a “residual approach” to forecasting the expected income of a given intangible asset; and is commonly used to value intangible assets that are the basis of a business model, such as customer relationships, ongoing research and development or brand equity.

Our expert system thinking

Different combinations of these methods are used based on the type of asset and other industry guidelines, which are computed by Intanify's unique expert system decision-making. Our expert system was developed with a leading AI expert and valuation practitioners to offer straightforward and practical value estimates for our users for use in their strategy and other key tasks.

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