Brand value (brand valuation)

Brand value is the financial translation of the economic advantage a brand confers on its owner: the ability to charge more, retain customers, enter new markets or grant licences. A brand is an identifiable Intangible asset, whose valuation arises in transactions as well as in accounting or tax contexts.

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Three broad families of methods coexist. The income approach, the most common, often relies on Relief-from-royalty, which estimates the royalties a third party would pay to use the brand, or on the excess earnings attributable to the brand. The cost approach reconstructs the investment needed to recreate an equivalent brand. The market approach draws on comparable transactions, rare and therefore of limited use for brands.

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For example, a brand used on 10 MCHF of sales, to which the market would apply a 4% royalty, saves its owner 0.4 MCHF of royalties a year. Discounted over time, these flows value the brand at around 3 to 4 MCHF under the relief-from-royalty method, isolated from other intangibles.

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A rigorous brand valuation isolates the brand's own contribution from other intangibles such as customer relationships or technology, to avoid double counting. It forms part of a broader Valuation of Intangible Assets, essential in a purchase price allocation or an Impairment test.