Intellectual property is an exciting yet complex world. It can start as an idea, a creative moment, or a first draft. It then transforms into something that provides real value to your business. It might be your moat or competitive advantage. In a business, pinpointing tangible sources of value, like inventory, a building, or cash in the bank, is often straightforward. Intellectual property is intangible, so it can be more complicated to determine the inventory of intellectual in your business.
What is Intellectual Property?
Intellectual property comes in many forms, and there are a few ways to protect your rights legally. Here are a few common types of intellectual property that your business may have:
- logo or slogan
- customer lists
- algorithms
- domain name
- a secret recipe or formula.
Several formal, legal ways exist to protect and create an ownership structure around intellectual property. Typically in Canada, your IP can be legally protected depending on its type, either as a trademark, patent, copyright or industrial design. Once you have those in place, you might wonder how much value it brings to your business.
7 Reasons to Get an Intellectual Property (IP) Valuation
Understanding the value of your intellectual property can provide you with a much more accurate picture of your business. Your overall business may be undervalued if you do not have an inventory of all your IP. In addition, there can be many reasons to establish a value for your intellectual property.
Strategic Decision-making
Intellectual property may be overlooked as a source of value. However, it can be the thing that sets your business apart from its peers. Knowing what your IP is worth can help you define strategies you might otherwise miss. Some businesses may use the IP to look for new R&D opportunities. Or, if you have changed business strategies, divesting from IP in your possession can help you monetize or extract additional value from them.
Licensing
Licensing is a common business model. Consider licensing your brand or technology to earn a royalty or paying a royalty to use someone else’s intellectual property. Licensing can provide opportunities for you to grow your business. Knowing the value of the license can help you make better decisions that align with your business.
Better Risk Management and Protection
Intellectual property is often developed internally over time. While it sets your business apart, it can also come with ownership risk. Once you understand the value of the IP in your business, you can ensure that adequate risk management strategies are in place to protect your IP and competitive advantage.
Financing or Reorganization
Whether you’re looking to take on debt from a lender, additional financing from investors or looking to buy or sell a business, it is vital to have a good sense of what the overall business is worth. You might have intellectual property that significantly impacts the valuation of your business. An accurate valuation can provide you with the best value in any transaction.
Estate, Succession and Tax Planning
Valuations are an essential tool in succession, estate and tax planning. And if your business has valuable intellectual property, getting an accurate valuation is fundamental when planning the future of your business. Whether you’re looking to transfer or sell your business, a valuation can help determine the company’s value at a point in time when establishing the estate or trust. An accurate valuation is essential, particularly for family-run businesses, to help you establish a succession plan that works for you and your family’s needs.
Infringement Damages
In many cases, it can be complex to establish rights and value for IP. There are often lawsuits in case of IP infringement. Valuations are essential in calculating damages and awards as part of an infringement lawsuit or settlement.
Accounting or Tax Compliance
If intellectual property is a part of your business, there could be additional tax or compliance requirements you may be subject to. Establishing the value of the IP may be necessary to help you stay compliant with any tax or accounting obligation.
How to Etablish Intellectual Property (IP) valuation?
IP valuation is often more complex than valuing tangible goods. Many variables and assumptions guide the professional valuations of IP. Values may change over time due to business growth, competitive or consumer market changes, or regulatory challenges.
Ready to Value your Intellectual Property (IP)?
It is vital to work with professionals who understand your business and can provide an accurate value of the IP you own.
Contact Ford Keast LLP in London, Ontario, for all your Business and Intellectual Property Valuation needs
Whether you are looking to buy or sell a business or are looking for estate planning valuation, the business advisory experts at Ford Keast LLP can help. Our business experts work with businesses of all sizes to advise on business valuation services and overall strategic transaction advice. To learn more about how Ford Keast LLP can provide you with the best financial expertise, contact us online or by telephone at 519-679-9330.
