How to Evaluate a Trademark: The Stuff You Need to Know

Trademarks are not only used to provide legal protection to a company's name, design, word, etc. rather are intangible assets. Evaluating the exact value of the trademark is challenging.

Till a decade or two ago, no one used to evaluate the value of their intangible assets of the company.

However now, brands create the reputation of a product; motivates the purchasing power; and makes the product different from other generic products. In fact, almost every brand fetches a good amount of value. But evaluating the exact value of the trademark is a big challenge, and one must know the correct way to evaluate it.

Valuating intangible assets of your company like trademark or patent is a complex task which can turn your head upside dx`own, and thus makes the selling transaction adversative.

But the need to evaluate a brand is essential for many business activities, like a merger or acquisition; sale or purchase of the trademark or if you want to sell your company.

The first step in evaluating the trademark is to examine the historical prospects of the trademark like the total cost invested in it; profit margin associated with the products and the time it was first used, etc.

Related: How to Register a Trademark in India

After considering these options, you must follow the methodologies and different approaches as listed below:

The Income Approach

The most crucial element on which a trademark's value is determined is the income generating power of the business. The more the earning power, the higher the value of the brand would be.

Through future estimates of economic benefit, cash flows and risks involved, and converting this analysis into simple information; the income approach enables you to evaluate your company trademark.

Market Approach

In this method, the price of similar marks is considered and compared. It uses market-based indicators of value and takes similar marks into account; it analyses royalty rates and transaction prices to determine what the market is paying for similar intangible assets.

In this approach, market trends are considered, and other transactions are analysed.

Cost Approach

Cost approach considers the implicit as well as explicit cost incurred in creating the Trademark. Cost approach also covers the cost accrued in promoting the company and its brand promotion.

A particular focus on forecasts of market transactions is employed and estimated time and cost that would be required to make a similar trademark are considered.

Other Factors

Along with the ones listed above, there are other factors which a company should consider while evaluating a trademark or trademarks and to maximise their values:

  • Qualitative and quantitative characteristics of the trademark.
  • If there is any contract assigned or associated with the trademark.
  • Sustainability of the trademark in the market in future.
  • Market position a trademark holds in the current business.
  • The capital structure of the company and its modifications according to the needs.

Trademark carries a significant value in the business, and a company should evaluate its brand and know the exact value of their intangible assets. A company should work towards the goal of enhancing the value of trademark and other intangible assets for long-term profits.

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