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  • December 20, 2021

Understanding Different Approaches to Intellectual Property Valuation

valuation business

Physical assets and the current profit ratio are not the only factors that determine the value of a business. Colossal parts like intellectual property and goodwill are also important in shaping a company’s true worth. If you aren’t sure about what that means and how that matters for your company, here’s a quick guide to the same

Introduction to IPR Valuation

When you are dealing with the sale of your company over a merger and acquisition or solvency agreement, IPR (Intellectual Property Rights) Valuation holds critical importance. This covers all the intangible assets the business has like products, services, or processes that are either patented or can be patented. The brand, trademark, or copyright also form a part of this valuation. Moreover, the unique creation of your business might be the driving force for differentiating your brand. And this can help define a better market price for your business during a deal.

Approaches to IPR Valuation

If you are planning to get IPR valuation for your business, you will be getting it done through one of the following methods:

  • Income-based: If an intellectual property has a direct economic impact on the business, it can be used to calculate the potential of cash flow generation.
  • Market Method: Gauging the market behaviour, this approach uses valuations of similar transactions done by other businesses in the same industry and context.
  • Cost Method: If the IP is not easily quantifiable for its economic benefits, the cost of acquiring that asset can be used for valuation. However, the asset should be easily reproducible for this approach.

With this knowledge, you can always get the best business valuation from an expert.