How are the IP valuation services done for the private company?

The valuation of a business is the act of calculating the financial value of the business or asset. The objective of IP valuation services is to arrive at a company's estimated intrinsic value to enable entrepreneurs and investors to make informed decisions regarding purchases and sales. An essential part of the valuation process involves collecting and analyzing various metrics, including revenue, profit, and loss data, as well as risks and opportunities the business faces.

There are different methods to value a business or property. In valuing intellectual property, the value will vary according to many factors, primarily time, context, or purpose and method of the valuation. It is possible to determine a realistic valuation through good market research and professional advice. However, an absolute valuation can only be determined once the purchase, transfer or transaction price has been agreed to.

What makes an intellectual property valuable?

In many cases, intellectual property is far more valuable than physical assets. Often, the information provides a competitive edge over other entities, causing the owners to guard and protect it in particular. There are many reasons for a property valuation in your business. The most important of these are the following:

·         Identify the assets held by the organization and improve the decision-making process, especially in relation to determining specific future investments and developments.

·         It helps to avoid negotiating the walkout.

·         Deal in order to secure the organization's financial future

·         Determine how much compensation will be paid for infringements

·         To comply with legal and accounting standards.

·         To satisfy financial obligations, including taxes, dividends, and stamp duties.

Various valuation firms are working to deliver professional valuation services. For legal considerations, Intellectual Property is considered as a standard asset and recorded & valued based on the applicable legal and accounting standards. In accounting and general bookkeeping, IP is considered an intangible asset that has specific protection through patents, trade secrets, trademarks, artwork, and copyrights. Values related to investment decisions and damages for infringements tend to be more complex and also concern the business opportunity involved in the development of a patent.

Steps to valuing intellectual property:

A majority of companies seek the help of valuation experts when they want to sell or buy a business. It is generally considered that the IP asset's value is equal to what a purchaser would pay for it at a market price. IP valuation services, generally, involve three basic steps:

1. Locate the source of the intellectual property.
2. Identify the primary benefits that the IP provides.
3. Identify the approach that is most suitable for your valuation purpose:

·         Market-based approach: it utilizes comparable transactions/industry benchmarks and future income-based scoring.

·         Cost-based approach: used for financial records and taxation.

·         Elimination approach: IP is valued at the value of the company, minus any goodwill that cannot be directly attributed to IP.