Tuesday, December 9, 2014

Intangible Assets Valuation

I read an interesting article on Intangible Assets valuations today. The article was published in the Engineering Management Journal, http://www.asem.org/asemweb-emj.html (you have to pay to get access).  The authors explain how they develop a tool to help SMEs in Italy asses the value of their intangible assets. You can read the article for the full story and methodology but what interested me is that they defined intangible assets as:

Human Capital(i.e. the skills of the employees)
Internal Structural Capital( i.e organizational knowledge that belongs to the Company)
Relational Capital (the relationship between companies)

Placing a value on this can be quite difficult but essential for SMEs as it is usually these assets that are the most valuable for small businesses that do not have huge financial assets. I am curious about the small business owners themselves. How many small business have you encountered that have even attempted to place a value on this, should this be taken into consideration when looking at financing options? If so by whom the bank or the small business owner?

Relational Capital in particular is interesting. Its the "Who do you know?" concept. A business might be small but if the owners are well connected, say with city hall or the city procurement officer, this is a huge asset with potential value. I understand that the ethical considerations are there but to believe that a small business owner will not exploit such a relationship is naive at best.


No comments:

Post a Comment