How to Value Your Intellectual Property

Intellectual property is often a company’s most valuable asset, yet few business owners know what it is actually worth until they need to sell, license or raise money.

Valuing IP is part art and part science, combining income potential, market comparisons and the cost of recreating the asset from scratch.

The three main approaches

• Income approach: the future cash flow the IP generates
• Market approach: what similar IP has sold for
• Cost approach: what it would cost to recreate it

What drives value up

• Strong, enforceable rights with broad claims
• Proven revenue tied directly to the IP
• A long remaining life on the protection
• Limited competitive alternatives

Get a professional valuation before any sale, license or funding round, and you negotiate from a position of knowledge instead of guesswork.

Getting a defensible number

A credible valuation uses more than one method and documents every assumption, so the figure stands up to scrutiny.

• Use multiple approaches
• Document assumptions
• Refresh before each deal

A credible valuation stands up to scrutiny, so document your assumptions and refresh the figure before each deal.