My last blog post focused on some tips on forecasting which were fairly qualitative . I thought that it would be great to follow up by discussing a few technical mistakes done during company valuation. While trying to forecast company performance and valuing companies, we often fall victim of what I would refer to as the ‘routine trap’. That happens when we apply certain methods without understanding the logic behind those assumptions even though situations and circumstances could be very different and require changes in methods. Thus we end up with inconsistent company valuation. Let me go a bit deeper into few common areas of mistakes. Be warned that this will be a fairly long post.
‘How would you incorporate our brand value in our company valuation?’ A friend of mine was recently asked this question by a corporate professional. It is a pretty interesting question when you think of it. Let me start the answer with the definition of ‘brand equity’ according to wikipedia.
“Brand equity is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well-known names.”