Intangible Assets: What They Are and How They Can Add Value to Your Business

Contrary to popular belief, not all assets are tangible or even capable of bringing in revenue. These things are called intangible assets, and though you can’t see them, they’re still essential to your business.

However, that doesn’t mean they’re easy to understand at first. These assets can boost your business value, and once you understand how, your next business valuation services appointment will be a pleasant surprise, rather than an ice-cold reality check.

What are Intangible Assets?

Intangible assets are, simply put, the long-term assets of a company that do not have any tangible existence. Intangible assets often come in the forms of copyrights, goodwill, non-compete agreements, patents, etc. Of the 26.5 million businesses currently in the United States, most fail to realize the value of their intangible assets.

A trademark is any symbol, name, mark, word, or letter used by a company in order to differentiate one from another within the market. It provides visual differentiation from other companies on the market and can play a role in increasing a business’s value if it’s widely known and respected by consumers.

Copyrights grant a company right to design, manufacture, and sell its unique products or services. For example, if you create any intellectual works related to your business, those need to be copyrighted to ensure you have complete rights to them.

Believe it or not, your employees play a vital role in small business valuations. They are another form of intangible assets, as their skills and knowledge play a major role in how well a company performs.

How Intangible Assets Affect the Value of Your Business

Certain types of intangible assets are more valuable than others. Intangible assets such as intellectual property, knowledge, and relationships often play an outsized role in contemporary businesses compared to traditional assets like equipment, machinery, and technology.

However, the development of these intangible assets is essential to the long-term life of a business. Of the 5.4 million firms with employees operating today, seven out of 10 new firms only survive about two years, and a big part of that is a lack of intangible assets.

Any business valuation firm will tell you that it’s important to keep track of all of your assets, both tangible and intangible. Business valuation services take all of those things and use them to complete any number of comps valuations.

You may not think much of these assets at first, but they could make or break your business value. Have questions about intangible assets?