Selling Your Intellectual Property
February 27, 2009
We all know ownership succession in business is about understanding the importance of what comes next, so as to maximize owner value, because next counts. When planning your company’s future, it may come as a surprise when I tell you, “Selling your IP (intellectual property) are often the hardest assets to value and are sometimes either minimized or even, overlooked.”
Your IP (Intellectual Property) can include:
- Copyrights
- Trademarks and Service Marks
- Patents and Trade Secrets
Their commercial value can be influenced by the size of the markets and product/service sales related to them, by their age, by how well they are known, by what they “stand for,” by their applicability to other products/services (potential for line extension), among other variables.
Succession Planning and IP:
When working with your succession planner, your accountant and appraisers, ask about the appraiser’s qualifications in regard to valuing IP. It just can’t be valued the same way as you might value real estate, equipment or cash flow. Unless you are comfortable with the appraiser’s approach, ask your succession team leader to get an appraiser steeped in IP valuation. It may cost a little more initially*, but it can pay off in the end, particularly if the IP can make up shortfalls in other asset areas and help the owner(s) receive enough proceeds to maintain lifestyle. Because, as I said at the start – what comes next, counts.
*Some sellers question the value of doing their own valuations in advance of a sale unless the IP value is a significant portion of the selling price. Certainly the buyer will be valuing the IP, along with other assets. Because the buyer has no interest in paying more for your company than required, s/he is likely to “low ball” the IP’s value. Without your own appraisal, you have no way to counter the argument.
Take Note Michael Phelps
February 3, 2009
Take note Michael Phelps. A few years ago another good guy athlete, Kobe Bryant, got caught being not so nice, and it cost him millions of dollars in endorsement contracts.
I did several press interviews during that scandal. During the interviews, I pointed out that virtually all endorsement contracts contain a “morals” provision, stating that scandalous behavior on the part of the celebrity could result in immediate termination of his/her contract. I also noted that “Bad boy/girl” celebrities can act badly and hardly impact their endorsement contracts at all, but if you present yourself as one the “good guys/girls” you have to live up to your good reputation, or else.
From a business succession perspective – understanding the importance of who/what comes next – anyone seeking or holding endorsement or sponsorship contracts should think long and hard about behaving badly. It’s not just a matter of doing what’s right, we’d all argue in favor of that. It is also a matter of protecting the “goose” that lays golden eggs. Kobe Bryant was on the way to becoming a superstar in the endorsement arena. Michael Phelps has been on a similar track. Both derailed. How badly is still unfolding.
In Phelps defense, smoking marijuana is far less troubling than committing adultery. Furthermore, his 2004 underage drinking incident has not been repeated. Still, I believe he is literally on the brink. Some sponsors have not renewed (according to the Associated Press, Rosetta Stone, AT&T and PowerBar have ended their relationship with Phelps). Some are supportive (notably Hilton Hotels, Speedo and Pure Sport). Others (VISA, Kellogg, Subway and 505 Games), have yet to speak out (some sponsors choose to let contracts expire quietly rather than take a public stand).
To an advertiser, particularly a consumer products company, even the hint of scandal can tilt sales downward, particularly when parents as well as their children are controlling the spending. In a recessionary period it
might not take much to say, “Goodbye, Michael.” If Michael Phelps gets back on track, he’ll still make millions, but one night’s high has certainly lowered his prospects. Another incident and it could be even more costly.
There is always a “next.” Understanding the importance of, and knowing how to prosper from the transition is what succession planning is all about.
John Reddish speaks to and works with entrepreneurs and leaders who want to master growth, transition and succession to get results faster, less painfully and in ways that work for them. Contact John at: 610.506.6311 or e-mail to: Johnr [at] getresults [dot] com.
