Your business assets are valuable. You need to understand this when starting your own business. Not only are we talking about things like equipment and a building, but also the “intellectual assets”.

Situations arise that will necessitate the estimating the value of the company’s intellectual assets. Some of these include:

1. Whether it is time to sell part or maybe the entire business while the value is at its peak

2. Whether or not the company is earning a reasonable royalty for an asset

3. Whether or not a settlement is fair in dropping a lawsuit

4. Whether or not to buy another asset that the company needs

5. Whether or not the asset is about to outlive its usefulness and needs to be replaced

6. Whether or not to use the asset as collateral to borrow against

7. Whether tax implications favor the company

8. Whether or not the company is in compliance with all regulations

Here are the three models used when valuing assets:

Market Approach – the fair market value is determined by comparing what similar assets are selling for.

Cost Approach – the value is based upon how much money was used in creating, maintaining the asset.

Income Approach – the value is calculated by how much money is it bringing in or expected to bring in.

Valuing an asset is more of an accounting exercise than a legal one. Since the stakes are so high, and you do not want to get it wrong, hire a highly trained CPA to assist you in valuing you intellectual assets.