Unlock Your Brand's Ultimate Value Today

This is a chat I have often, mainly with entrepreneurs who over-value their brand, occasionally with people who are (potentially) being screwed in a sale.

The 1st answer is that your brand is worth what someone is willing to pay for it, but understanding why someone should pay helps.

Understanding margin and brand worth

One answer is margin. There may be ten other reasons why Pepsi bought Poppi, but eight cans of Pepsi cost £3.95. Eight cans of Poppi cost £11.50, nearly three times as much. The ingredients may cost a little more, but the production, packaging, transport, sales and logistics are the same.

Moreover, Poppi is worth a huge amount to Pepsi. Consequently, it yields three times more revenue at a higher margin for doing the same thing. This demonstrates brand worth in practice.

If you can build a brand that does that, you have a lasting advantage. The lesson is clear: value comes from higher margins on familiar activities.

Brand worth and pricing

This isn’t just drinks. I’ve been looking at Drirelease - a great eco material. Drirelase t-shirts on Thrudark are £65. On Passenger they are £40. Therefore the Thrudark and Acid brands are objectively brand worth more than Passenger.

A strong brand can lead to better click through rates (CTR). Take  a vitamin manufacturer with a CPM of £200 and a conversion rate of 0.5%, you get 5 sales for £200. Another brand has a CPM of £150 and a conversion rate of 0.75%. They get 10 sales for every £200 spent. The 2nd brand, can argue a very strong valuation, especially to the manufacturer, as they would get 2x the Return on Ad Spend (ROAS).. 

Your argument can work on multiple levels. When I sold Pooch & Mutt to Vafo, I effectively offered them 3 things:

1. A brand proven to work in the UK; The world’s 3rd largest pet food market 
2. A proven e-com team who could help them build e-com across all their other brands
3. A proven UK team who could help their other brands, and own label offering in the UK

You could argue that points 2 and 3 are more company than brand, but that’s for another time. Could Vafo have built all this themselves? Possibly. Would it have taken longer, cost more and been more risky? Definitely, that’s the value.

There are hundreds of iterations of this. 

The main point is you must prove to the accountants why your brand worth matters. This demonstrates your brand's value to stakeholders.

To finish off:

• Your brand is not worth ‘the multiples in your industry’. Just because another brand sold for 10x turnover and you make a similar product, does not mean that your brand is worth 10x turnover.

• The valuation a company gets for “money in”, is not the same as the value for “money out”. You see many crazy valuations when money goes in. You rarely see those companies get the same valuations if/when they sell. If you do, that is the outlier, not the norm. Notice how many companies sell without saying how much they’ve sold for, there’s a reason!

• You never know how a deal is structured. A headline can say “Company X gets £30m with a £100m valuation”. That can mean they got £29.5m in loans, and sold £500k of shares at a £30m valuation, to make the company look good.