Google Review

How do you Value Your Intellectual Assets?

intellectual propertyDo you frequent a restaurant regularly because of their unparalleled level of service?  There is one local pub in my neighborhood that is hands down the neighborhood favorite.  The neighborhood loves this pub not because we get the most amazing beer and pub food (although it is quite delicious).  No, we go there because of the staff.  The wait staff are friendly, welcoming and know how to service their patrons.  Their knowledge and understanding of running a good pub makes them high intellectual assets for the owner.  If the owner of the pub were to ever consider selling, he would have to factor in the value his staff brings to the business.

What are intellectual assets?  The MacMillan Dictionary describes intellectual assets as the knowledge, experience, and skills that employees have that an organization can use for its benefit.  Do you have a business?  Do you wonder what value your employees bring to the business’ capital growth?  How do you measure your employees’ impact on the success of your business?

Whether you are Elon Musk, the billionaire founder behind the launch of the first private space shuttle mission or just the owner of the small neighborhood pub, you will need to assess the value your employees bring to your business.  The first way to achieve this is by calculating the amount of income your employees generate for your business each month or year.  Start tracking their performance.  If other competitors are complaining that business is slow, yet you are still profitable then you may contribute this to your employees’ performance.

Perhaps your employees do not indirectly generate revenue.  Perhaps it is their knowledge and level of expertise that is needed for your business to be successful.  Elon Musk can not hire just anyone to work on his space shuttle expedition.  He needs the best highly skilled group of engineers and astronauts to make his first mission successful.  If you cannot measure your employees’ value in terms of dollar amounts, then you should measure the cost it would be to replace them.

By measuring how much it would cost in terms of finding a replacement for your employee will determine the value of the employee.  If you have a software engineer who developed a new program, his knowledge to the project may be non replaceable. It would cost money and countless hours dedicated to finding such a highly skilled engineer, and then more hours to train individual on new software project.  Meanwhile, your business suffers during this entire replacement process.  Thus, the software engineer becomes a high intellectual asset.

You can measure your employees value to your business in terms of dollars they generate or by the dollars spent to replace.  Once you are able to calculate the value of your employees, you can then compare your business in the market place.  The sales, listings and offers of comparable businesses will determine the overall business value.  These two ways to measure your intellectual assets are a great guideline.  However, if you are seriously considering selling your business, then you may wish to hire a Certified Public Accountant. CPAs are trained to do detailed valuations.  It is best to seek their help if unsure on business value.