Could your business be hiding something? Stephen Sudbury discusses how to unlock the hidden asset in your business that’s not on the balance sheet but creates up to 88% of your business value.
It’s no secret the global business world is rapidly shrinking as technology advances. Despite that being the case, there is still a fixation by business owners and their lenders on ‘bricks and mortar’ assets. The impact of this actually stifles growth and limits access to capital.
A 2017 study of Fortune 500 companies found 88% of the value in those companies could be attributed to their intellectual property (IP).
What is IP? Simply put, intellectual property is the often intangible aspects of your business that set you apart. Think systems, branding, processes, trademarks and copyright. They’re often factors that are hard to ascribe a value to but without them, you have little chance of attracting a premium on sale.
Most business owners don’t know what IP they own or understand its value. It could be 15 years of client sales history, a plan library, branding. These assets could be hiding under your nose!
It’s important to understand IP, know the extent of the risk that comes with it and insure against data loss that could sink your business.
Visiting a manufacturing client recently, I commented on the number of product templates on the wall of their warehouse. The templates made production runs easier but the issue was that in the event of a fire 15 years of intellectual property would go up in smoke.
The simple solution? Those templates are now being digitised and stored online in the cloud. This process creates IP, adding value to the firm that could one day help fetch a premium sale price for my client.
The greater IP and less reliance on owner ‘head’ knowledge the higher the business value and while bankers don’t value it directly, they do take into account good systems and processes when they are doing cash flow lends.
Some food for thought…
Do you know what you own?
Do you know the extent of your risk? For example, could a staff member resign and take your customer list with them?
What steps can you take to minimise risk?
How do you maximise the value of your IP?
At Sudburys we can help you answer these questions and more. Email us to find out how we can help unlock the value in your business. It could be hiding in plain sight!
Important changes from 1 July
From 1 July there are some key pieces of legislation coming into effect that you may need to know about.
1. Anti-money laundering regulations
2. Automatic Exchange of Information