What is Brand Goodwill?
What are tangible assets? What are intangible assets? And what is brand goodwill? This will help you determine the worth of a brand!
A company's value consist of two types of assets: Tangible assets and intangible assets.
Tangible assets consist of physical assets, which you can touch with your hands. Production machines, inventory, products, parts, office equipment, etc. On the othere hand, intangible assets cannot be held in your hand or touched, since they are not physical in a sense. Intangible assets are more based on intellectual assets, recognition of a brand and brand goodwill. The value of a company is tied to both tangible and intangible assets. E.g. Cocacola is more than taste, water and bubbles. It is also a brand, which has an added value to its name.
Cocacola is one of the most recognizable brands in the world. Cocacola's intangible assets include their logo, slogan, and the brand itself. By getting a product from Cocacola, you add a certain value and quality to the name itself. Assessing the value of the brand and the intangible assets is a mixture of psychology, sociology and culture. It might be worth more in certain areas, where the brand recognition is high, and therefore, the goodwill is high.
Measuring the value of a brand's goodwill can be done in the following way:
Lets take company X, who wants to buy company Y. They pay 20.000.000$ for the firm. Company Y has tangible assets of 15.000.000$, and intangible assets worth 3.000.000$. The brand goodwill is therefore 2.000.000$. This is the worth of the brand itself. The brand is adding an extra value to the products, the company, and therefore also the value in total.