Can a brand or trade name have value apart from the business? Yes. However, the ongoing business, if profitable, will enhance the brand value and be enhanced by the brand.
For the profitable business, the value of the brand (IP) is part of the total value of the business enterprise. The brand contributes to business value in one or more of the following ways:
- Excess Profit – margin based on the consumer/client's emotional connection to the brand. He is willing to pay a higher price to enjoy that satisfaction or fulfillment of that expectation of quality.
- Cost Savings – ownership of the brand avoids the payment of a royalty to license the brand (relief from royalty).
- Customer Retention – repeat customers create loyalty and auxiliary product / service expansion and growth.
One recent example of brand value is the acquisition by Volkswagen of Rolls Royce. Volkswagen (VW) produced an S class vehicle, with a sticker of about $150,000. With a middle class "brand," the luxury sedan did not sell. After VW acquired a distressed Rolls Royce (RR) company, the sedan was given a makeover – luxurious interior and the Bentley brand. Voilà. This lower end Bentley is a strong seller for VW.