Even the smallest of companies need to go digital nowadays. Despite their small staff strength, they still issue paychecks differing in hundreds or thousands of dollars, and a slight error in such information would ultimately affect their business valuation.
Going digital has become a prerequisite for every organization’s survival and growth in the market scenario today. This significant change would mean abandoning the industry models and values of older years.
However, the problem arises when trying to ascertain the worth of these digital assets in businesses!
What is a Digital Asset?
When valuing the worth of a business, it is worth considering the true worth of the business digital assets as well – these digital properties might have more value than the other physical assets.
Therefore, businesses using the following digital services and products have to account them as digital assets while valuing the business:
- Domain names
- Other forms of Digital Data
The Importance of Digital Assets in Businesses
Digital and intangible assets are an integral part of businesses today. They help to increase efficiency and effectiveness, and support growth and expansion.
However there are times when it is difficult to ascertain their exact value, which makes the buying and selling of businesses more challenging.
Why Is It Difficult to Value Digital Assets?
Often, digital assets are difficult to value because they are not physical properties and they are not exactly owned by the business, despite their proven importance to the business.
Some Of The Mistakes Committed In Digital Assets Valuation Are Listed Below: –
✔Adopting the wrong or underrated valuation techniques
✔ Using the valuation techniques wrongly
✔ Gathering or using inaccurate information to analyse the value
✔ Excluding the value of some digital assets
✔ Ignoring the ultimate consequence of inaccurate valuation of digital assets
Digital Asset Valuation
For a more accurate valuation of digital and other intangible assets, it is best to engage an expert who can derive the most accurate worth of these assets, and work out the valuation. This improves the quality of accounting, which then helps to avoid capital losses especially when buying or selling these assets or the business.
A professional business valuation service provider would be a specialist of digital asset valuation, having expert knowledge of methodologies and techniques to assess the value of all digital assets, including the online ones.
The Common Methodologies For Valuing Digital Assets:
- The Market Value approach
- The Cost approach
- The Income approach
The Common Considerations for Domain Valuation Are As Follows:
- Search engine traffic
- Google ranking
- Domain marketability
- Web traffic analysis
- Name length
- Organic traffic
- Revenue generation, and others (i.e. selling price of comparable domains)
Digital Assets Valuation Across Different Sectors
A wide range of sectors, banking, pharmaceuticals, financial services, consumer goods, retail, fashion, fast-moving consumer goods (FMCG), and the nonprofit and leisure organizations, have also started including digital assets in their business valuation. Often, these assets are in the form of a brand.
A company’s brand is an intangible asset, which is equally contributing to the overall business valuation. Hence brand valuation is as important as digital asset valuation.
Both brand and digital assets valuation allows an understanding of the brand’s equity and the company’s potential of growth, which facilitates sound business and legal decisions.
Providers of business valuation services understood the growing value of digital and intangible assets, and their underlying effects on a business’s value. To maintain a good level of objectivity in their profession, they are well updated of the relevant skills and knowledge in digital and intangible assets valuation.
Hence they can help identify and track the potential and value of a company through analyzing the company’s most valuable assets, usually the intangible ones.
As digital assets form the major parts in any business, they have to be treated significantly like other resources and accurately assessed for business valuation. Do get in touch with a digital asset valuation service provider should your business own digital and/or any intangible assets.
Contact us for an initial assessment of your digital assets.