Discounted cash flow is related to the value of the company , rather than just considering the potential of the brand. Therefore, it is possible to have a global vision, but it is still necessary to think about the factor linked to brand equity .
Its purpose is to consider the fluctuation in the value of money over time. The idea is to understand, for example, the calculation of the value in the present in relation to an investment that will be international mailing list made in the future. It is also necessary to consider the internal rate of return to adjust the numbers.
This method uses several aspects such as contracts, accounts receivable, sales projections , and so on. In this way, it is possible to “anticipate” the value that will be moved and understand how much it will mean in the present — and, therefore, how much the brand will be worth, if all of this comes to fruition.
Although it involves several calculations, it is not a very complicated alternative. In fact, you can simplify certain numbers to have an efficient calculation base. This way, it is possible to combine this study with other factors, in order to have a robust understanding of the values.
Difference in profit margin
Technically speaking, brand equity is not just the value of the brand. It mainly involves the difference between the profits from a branded product and a non-branded one . If the items are similar or the same, then it is a sign that the difference is purely in the brand.
This difference helps you get a more precise and tangible idea of this value. From this number, you can understand the weight of the other factors we mentioned and how they impact your results strategy.
Imagine a situation where there is a sale of product A, without a brand, which costs R$50.00. Product B is very similar to the first and serves the same purpose. However, because it has a widely publicized brand, it costs R$75.00. In practice, brand equity is R$25 per unit. If the second company sells 10,000 units per month, then the monthly value of the brand comes to R$250,000.00, even though the revenue is R$750,000.00. Do you see how important it is?