Inter Brand Valuation Method - By Freddy Guevara

8/3/2019 Inter Brand Valuation Method - By Freddy Guevara

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Freddy [email protected]

www.freddyg.wordpress.com
mailto:[email protected]:[email protected]


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Brand is an important asset that add value tothe company and therefore it needs to beevaluated.

Actually the infinite number of choices in thee-market make the companies build strongbrands to keep them in the mind ofcustomers.

The trend is to incorporate metrics toevaluate brand performance and show thatvalue in financial statements.


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The value stages of a brand are:

Marketingprogram

investmentCustomermind-set

BrandPerformance

Shareholdersand

employeesvalue


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The interbrand brand valuation methodconsists of:

Target markets

FinancialAnalysis

DemandDrivers

CompetitiveBenchmarking

Brandearnings

Branddiscountrate

Brand Value(Net present value of future brand

earnings)


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After we have segmented our markets andanalyzed our markets, we need to analyze ourfinancial statements in terms of revenues,sales, costs and forecasts.

Then, determine the drivers of the demandfor our particular brand, such as elasticity ofthe price, the level of need, the amount of

competitors and substitutes, etc.


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A competitive benchmarking analysis isnecessary to establish the gap between ourbranding processes and strategies with ourcompetitors.

We will determine the brand earnings in onespecific period, and the brand discount rateonce we have gathered our financial, demandanalysis, and competitive information.


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Now, it is time to determine our brand valuethrough the application of the NPV formula:

To calculate the NPV, we find the presentvalue of the individual cash flows and find

the sum of those discounted cash flows. This value represents the value the project

add to shareholder wealth. r = 10% ProjectS

Time period: 0 1 2 3 4 Cash flow: (1,000) 500 400 300 100

Disc. cash flow: (1,000) 455 331 225 68

NPV(S) = $78.82


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The previous formula gets the net presentvalue of a project, and that is the same basicoperation to calculate the future value of abrand, and it is simple, a brand generates

value for shareholders, and that value is cash,and your brand has to generate the cash flownecessary to keep it in the market and evento be the source of future brands or brandswith financial problems in our portfolio.


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At the end of the day, that is the importantrelationship: Brand-cash flow.

I know that we have feelings and maybe thatbrand is our most loved one, but work betteron your brand strategy so it can generate thecash flow that shareholders are expecting.You have the tool and you have moremethods in the market, but justify yourmarketing investment producing a winnerbrand that generates the Value-Cash.


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This is the beginning of a trend that supportsthe fact of incorporating the financial value ofa brand into the balance sheet.

We have already countries trying: UK, Hong-

Kong, Australia. Understanding we manage markets whose

needs are represented by the creation ofbrands and when that process matches, those

brands generate the value expected and thefinal result is more inflow of cash flow foryour company.

Documents

Inter Brand Valuation Method - By Freddy Guevara