Assessing a brand’s value is not rocket science, nor does it constitute ethereal hocus-pocus. Good brands have real value and understanding this is central to measuring whether or not your brand equity is increasing or whether you have a brand in decline. Whether you are a brand asset manager at a Fortune 500 company responsible for the brand of a product line, a professional concerned about his/her personal brand, or the CEO or entrepreneur measuring the brand value of the enterprise you must value your brand in order to understand and manage your brand.

In today’s post, I’ll give my perspective on not only why a brand should be valued, but also how it should be valued…

Think about this…If you can’t place a value on a brand how do you determine how much to invest in it, how do you measure its success and how do you raise capital for it? If you look at your balance sheet and you don’t see a tangible value associated with your brand it is time to have a conversation with your CFO. By the time a finance officer has reached the C-suite, he or she needs to have a solid understanding of how to apply and leverage finance and accounting principles to the benefit of all business units aggregating value for the benefit of the entire enterprise. Not understanding the value of a brand, much less how to value it is absolutely unconscionable for a CFO.

Understanding the key to measuring brand equity is central to maximizing valuation. In fact, brand equity can actually represent a large component of total valuation.  This is specifically backed-up by research from Zyman Institute of Brand Science which notes that brand equity can actually account for more than 60% of total valuation when using Tobin’s Q ratio. This ratio is a valuation methodology devised by John Tobin of Yale University, Noble laureate in economics.

Even if you don’t believe Tobin’s academic hypothesis, all you have to do is look at the absolute value placed on real-world brands…Google’s brand is valued in excess of $60 billion dollars and there are easily in excess of a few hundred brands that sport economic value of more than $1 billion dollars including BMW, McDonalds, Goldman Sachs and the like.  Even smaller privately held companies with valuations of $10 million or less can experience brand equity that accounts for a considerable portion of their worth.

The four standard brand valuation methodologies which are accepted by both the Financial and Accounting Standards Board and the International Accounting Standards Board are income-based, market-based, cost-based and hybrid valuations. While there can be reasons to use one methodology vs. another it has been my experience that using the hybrid model to capture the best benefits of each of the other three methodologies often results in the highest overall valuation.

Let’s examine the value of personal brands as well…Do you think Trump or Oprah value their brands? You bet they do…If you’re a highly regarded CEO who has developed a strong personal brand it is likely that not only has your personal brand influenced the value of the corporate brand, but it is also likely it has had a positive impact on everything from your compensation to your marketability to your ability to recruit and retain teir-one talent. If you happen to be a consultant or professional advisor the manner in which you’ve built your personal brand and managed your reputation will have a direct tie to how loyal your clients are, the speaking engagements and interviews you receive and to the overall success of your practice. Personal branding is the most overlooked brand genre, but in my opinion is, without a doubt, the most important and meaningful brand genre.

Regardless of whether you are talking about personal brands, corporate brands, product brands, etc. the fact of the matter is that real brands have real value and produce real returns. I want to encourage readers not to conduct a brand valuation just for the purposes of retroactive scorekeeping, but rather to understand how brand equity is driving overall financial performance so that you can make better business decisions. Good luck and good branding…