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The importance of IP for your business
On the balance sheet
On the balance sheet
Know what IP you own
That may sound simplistic, but all too often businesses overlook some of their most important assets when the time comes to take stock of their assets.
You may be surprised just how much of an asset IP can be. It can add up to a substantial percentage of your company's total value and it's essential you account for it.
In an innovative and dynamic business, the value of its IP can be much greater than the value of its physical assets. Regular inventory maintenance should include IP as a matter of course on the asset register.
If your business has grown rapidly, you may be unsure of the IP assets you own. Experts in IP management can help you compile a register by undertaking an IP audit.
Remember! If you haven't accounted for it, you can't use it!
Whenever you employ consultants or outside suppliers, make sure you own, or are legally entitled to use, any IP you need for the operation of your business. This should be explicit in any contract or agreement you sign for these services.
IP assets appreciate!
Unlike many physical assets, which depreciate, IP may appreciate quickly in the market place and this should be reflected in your IP asset register.
Like other business assets, your IP should be valued. This may help you obtain better access to finance and will almost certainly increase the value of your business.
Begin by taking stock of your formally registered rights and trade secrets. These are possibly a little easier to identify and value than other kinds of IP.
Consider other aspects of your business, such as client lists and staff know-how, which are also worth protecting-usually through confidentiality agreements. Add everything you can think of to your IP asset register.
Your business adviser or IP management expert can help you to both identify your IP and to calculate an appropriate value for all of these assets.
Financial leverage and investment
If you manage your IP and ascribe a value to it on your balance sheet, your business is more attractive to the business and finance communities. Think of some of the world's most recognised brands-the dollar value placed on these brands adds substantially to the company's overall worth.
This can really give you a lot of financial leverage. It will also benefit your business when it comes to enticing a potential investor or buyer, or getting approval for a loan or refinancing for expansion or research and development, for instance.
Goodwill
Careful marketing and exploitation of your IP can greatly improve the value of your business in the marketplace. This is often referred to as 'goodwill' in accounting terms and it can radically improve your selling price.
Goodwill is an intangible asset valued according to the advantage or reputation a business has acquired over and above its tangible assets.
Increasing the value of your IP will usually require ongoing investment-in marketing and promotion, for instance-to develop and maintain the reputation and recognition of your business. You may also need to invest time and money in ensuring others are not using your IP.
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