The physical assets in your business are easy to value because they are typically assets with a finite, predetermined monetary value. Over the years, studies such as those by Aon, have shown that physical assets have become a smaller part of a company’s total worth. As technology development continues, businesses increasingly rely on emerging developments in the digital world such as artificial intelligence, robotics and cloud computing. Intangible (or non-physical) assets, being creations of the mind, have grown to represent the larger share of a company’s value.

But, without a physical form and the ability to easily convert them into cash, working out what these assets are truly worth can be challenging. There are eight key intangible categories, according to a joint Aon-Ponemon global report, the majority of which can be protected by intellectual property mechanisms:

  1. Intellectual Property: Assets such as trademarks, patents, copyrighted works and trade secrets.
  2. B2B Rights: Rights of value generated between businesses, such as royalty and licensing agreements.
  3. Brand: Value associated with consumer perception, such as brand equity.
  4. Hard Intangibles: Assets usually found on balance sheets as a specific item, such as goodwill or software licences.
  5. Data: Stored information on computer systems, such as customer lists.
  6. Non-Revenue Rights: Assets that don’t tend to affect any revenue generation, such as non-competition agreements.
  7. Relationships: Value associated with people / corporation networks.
  8. Public Rights: Rights of value generally in the public interest or government handled, such as planning permission or drilling rights.

“Intellectual Property is more important than ever as businesses recognise a paradigm shift from tangible to intangible assets,” says Aon CEO, Greg Case. “And while protection is core to any IP strategy, it can also have a significant capital value for any enterprise.”

In the last year, many business operations have faced difficult trading conditions, resulting in permanent revenue loss and sudden, unexpected liquidity distress. Smaller enterprises are likely to have much lower cash reserves and minimal access to credit, and it has become evident that those companies must look for a new way to generate short-term funding.

Having a good understanding of your Intellectual Property assets’ actual monetary value can help you use them as collateral for a loan and in many other business decision scenarios. For example, in the case of a joint venture (JV) or a merger & acquisition (M&A), it is important to understand the fair market value of the technology part you are going to purchase or sell. In addition, in a valuation, the targeted intellectual property assets are put under a magnifying lens, revealing unnoticed investment opportunities, development possibilities, as well as possible risks. In respect of business growth, the real value behind intangible assets lies in how they are exploited or commercialised.

In discovering the value of intellectual property as an intangible asset, owners should carry out an IP audit and register intellectual property where necessary, as IP rights become more valuable when their property rights are protected through registration, commercialisation, and litigation.

By Stefaans Gerber | Patent Attorney

Barnard Inc.

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