How Brand Helps Predict the Future Value of a Business

March 12, 2010

How to Better Value Braded BusinessHow much is an organization’s brand worth?  The question of how to value intangible assets, such as IP and brand equity, is certainly a pressing issue with no definitive answer as of yet.  However, Natalie Mizik, a professor at Columbia Business School, and her colleague Robert Jacobson, recently found evidence that incorporating brand equity into a financial analysis can better predict the total value of a firm.

Mizik and Jacobson found that by incorporating Young & Rubicam’s BrandAssetValuator and its five brand metrics into a multiplier-based valuation, they made a 16% more accurate prediction of a firm’s value than when using traditional accounting variables alone.  They did find, however, that the predictive power varied across different sectors, with much less impact on retail and apparel and the greatest impact on consumer durable goods.

The nitty gritty details of Mizik’s and Jacobson’s analysis (not for finance- or math-phobes!) are available here. And, in fact, they may come in useful for anyone making the argument that brand equity does deliver financial impact.

To request a copy of Mizik’s (slightly less technical) BRITE Research Brief: How to Better Value Branded Business, contact: ColumbiaCaseWorks@gsb.columbia.edu

BY MATTHEW QUINT

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