Any time you’re considering making a change to your business, such as a merger, sale or acquisition, it’s important to have a complete valuation conducted on every aspect of your business.  In recent years, it’s become more popular to consider not only all of the tangible assets of a business that you can see, but the intangible assets that you can’t as well, also known as intellectual property.  Most business valuation firms will include this type of appraisal in its valuation for free, as a form of goodwill valuation.

Intangible assets or intellectual property of a business includes anything that makes your products branded and marketable.  This means trademarks, copyrights, patents, engineering drawings, software and trade secrets, and even your customer relationships are considered intellectual property.  All of these things can add value to your business, so it’s a good idea to use a valuation firm that offers goodwill valuation for these types of things.  Make sure they know what they’re doing though, because this process is relatively new and for the numbers to mean anything, they’ve got to do it right.

There are two different methodologies that a valuation firm could use for intellectual property valuation- enabling or blocking.  Enabling allows a company to look at their intangible assets with intent to utilize or commercialize the intellectual property, while blocking is an effort to manage the competition and ensure that their business is a step ahead of the other businesses in the industry.  Once it’s been decided which methodology will be used, an intangible valuation model is created based on this framework.

There are a few generally accepted methods of ip valuation, but one of the most commonly practiced is the type that is used in litigation.  Luckily, since this is a common method of intellectual property valuation, it’s not that difficult for a firm to do it and they can present the values much in the same way that they would if you were facing legal issues to prove the value in the intangible assets of your business.

Intellectual property value is often invisible to the public eye, but when you’re making a business transaction, it’s important to find a business valuation firm that knows how to include this in the overall value of your business.  Look for a firm that offers goodwill valuation of intellectual property and you won’t be disappointed!