ROYALTY RELIEF METHOD

Royalty Relief Method evaluates the theoretical assumption that if the brand had to be licensed from a third party there would be a royalty charge based on turnover, which would be levied for the privilege of using the brand. By owning the brand royalties are avoided, hence the term ‘royalty relief’ which means that the royalty is being saved. The royalty rate is applied to an estimated level of future maintainable sales and the resultant after-tax royalty stream is computed. The Net Present Value (NPV) of all forecast royalties represents the value of the brand to the business.

ECONOMIC USE METHOD

Economic use valuation method, based on discounted cash flows analysis of net brand earnings, is the most widely recognised approach for brand valuation. This method provides the multidimensionality to brand valuation as it combines brand equity with financial measures. Such valuation considers the economic value of the brand to the current owner in its current use. This brand valuation method includes both a marketing measure that reflects the security and growth prospects of the brand and financial measure that reflects the earnings potential of the brand.

PREMIUM PROFIT METHOD

The Premium Profit Method is determined based on the value of the brand and the difference between the estimated cash flows that would be earned by a business using the brand with those that would be earned by a business that does not use the brand. This difference represents the additional cash flows related to the brand. The calculation of the brand value is effected by applying the appropriate discount rate to estimated future brand cash flows.