You’ve probably heard the phrase “Life is about the journey, not about the destination.” The same sentiment can be applied to branding—every stage of your brand development is equally important and deserves your time and attention.
But when you’re building a brand for your business, it’s also critical to keep the destination in mind. Even the most dedicated business owners usually end up selling at some point—after all, everyone deserves to enjoy retirement after years of hard work. And even if you’re just starting out in your brand journey, it’s not too early to think about how you want that journey to end.
Ultimately, you want to build a business that not only brings you financial success in the short term, but in the long term. You also want to be confident that the business you worked so hard to build will be in safe hands if you decide to sell. Although there are plenty of considerations when selling your business, the most important is knowing how much your business is worth—and you might be surprised at how much your branding affects that number.
Let’s take a closer look at how your business is valued, how much your brand contributes to that value, and how to optimize your branding to make sure you’re ready to sell once you reach your journey’s end.
"By having marketing systems in place, it increases your company’s revenue and earnings which is primarily what determines the value of a business. In other words, by having a strong brand presence, you are attracting more potential customers, sales, and ultimately earnings. It is difficult to separate these marketing systems out and put a price on them, but they are a big factor in the overall valuation."
Tim Whipple | Principal, Sunbelt Business Brokers
Preparing To Sell Your Business
Just like how starting a business isn’t something you should take lightly, neither is selling your business. Preparing to sell your business takes planning, and, often, help from professional advisors. If you go blindly into selling your business, you can risk doing what insiders call tainting the marketplace.
Here’s how tainting the marketplace works: A business owner who’s eager to sell contacts buyers who seem most likely to purchase their business without taking additional precautions, such as having their business valued or hiring an advisor. If the buyers aren’t interested in the business, the owner will need to pull their business off the market until they’re fully ready to sell.
But the owner hasn’t just wasted time and resources—they’ve lowered their odds of a successful sale in the future. Buyers aren’t likely to give the business another chance after rejecting it the first time around, making it harder for the owner to sell the business and therefore tainting the marketplace.
This doesn’t mean you should let the fear of tainting the marketplace stop you from selling your business—it just means you need to prepare. And one of the best ways you can prepare to sell your business is to find out just how much it’s worth.
Putting A Value On Your Business
There are several factors that go into determining how much your business is worth, but at its heart, your business’s value is simply a comparison of its assets versus its risks. One important asset is your business’s EBITDA (Earnings Before Interest, Taxes, Depreciation, & Amortization)—essentially, its cash flow. However, much more than revenue goes into valuing your business.
Buyers also assess your business’s value drivers and transferable value. These are the internal elements of your business that allow it to maintain or improve upon its cash flow even in your absence. A few examples are a capable managerial team, a stellar operating system, a reliable customer base, and, of course, a strong brand.
The concept of a brand contributing to its business’s overall valuation is relatively new, but extremely important. According to Frank Findley of the Marketing Accountability Standards Board (MASB), “brands are one of the most valuable but least understood assets” of business. A 2018 analysis from MASB showed that brand accounts for an average of 19.5%, and up to 50%, of enterprise value, and countless additional studies reinforce the high ROI of good branding.
But how do you measure, and then improve upon, the value of your brand?
Measuring Your Brand
Before we can find the value of your brand, we need to know how to measure that value. A 2017 paper from the International Organization for Standardization (ISO) outlined two different ways of measuring your brand’s power: financial valuation and non-financial evaluation. A brand’s financial valuation is simply the monetary value of a brand to a company—that is, its worth as a transferable asset of a company. A brand’s non-financial evaluation is much more broad, and includes factors that have nothing to do with cash flow. While financial valuation is only concerned with the impact of a brand on its business, non-financial evaluation takes into account the impact of the brand on its customers.
Non-financial evaluation includes:
Brand development: The combined contribution of a brand’s tangible and intangible resources, quality, service, and innovation
Brand strength: The amount of positive or negative influence a brand has on its customers and other stakeholders
Brand performance: The level of impact a brand has on the market
Financial valuation includes:
Monetary value: The amount of cash a brand contributes to its business overall
Financial valuation and non-financial evaluation work in tandem to produce an accurate picture of just how much your brand is worth. Brand development determines brand strength and performance, which in turn determine its monetary value. Together, you have a system that produces a feedback loop that allows you to constantly improve upon your brand and to see a higher ROI on your branding efforts.
Maximizing Your Brand’s Impact
Hopefully you can see that your brand has a huge impact on your business’s overall value, and that there’s a lot that goes into how much your brand itself is worth. But what does all of this have to do with selling your business?
Remember that in order to sell your business with confidence, you need to know its value. The higher a business’s value, the easier it will be to sell—and since your brand has a major impact on your business’s value, working to create a strong brand will help you not only in terms of short-term sales, but in the larger scheme of your business’s lifespan. The bottom line is that branding can have a huge impact on your business’s valuation—but only if you constantly work to nurture and improve it.
How do you do that? Here are a few characteristics of strong brands with high financial impact:
Pragmatism:
Above all, strong brands should strive to provide products and services that are genuinely helpful to customers and improve their lives—and to ensure that those products and services are available right when and where the customer needs them.
Positive Associations:
We’ve seen time and time again that customers respond well to positive emotions and actions associated with brands, whether that’s a tearjerker advertisement or a partnership with a nonprofit.
High Visibility:
Customers won’t be able to buy your product if they’re not aware you exist! This is why sending consistent email updates to your list is so important—even if it’s months or years before they make a purchase, you want your brand to be the first name that comes to mind when they do need your services.
Social Media Presence:
It’s no secret that social media is critical in today’s business landscape, so it’s not surprising that it has an impact on your brand’s financial value. An effective social media presence can increase brand awareness, drive direct sales, and much more.
If you can work consistently to improve these aspects of your brand, you’ll see a truly remarkable return when it comes time to sell your business.
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About Miss Details
Founded by Tanya Gagnon in 2004, Miss Details is a full-service branding and design firm which helps entrepreneurs and companies launch, adjust and reinvent key aspects of their branding and business marketing strategy. With a background in all aspects of interior and experiential design and a passion for data-backed design, Tanya leads the Miss Details team to guide her clients through everything from a refreshed website to a full rebranding, helping them put the pieces together to create a consistent, authentic, unique brand image.