Dernière modification le 04/09/2022 à 22:37 par Kate Griss

by Erwan COATNOAN DE KERDU

Intangible Capital Value

Our core business: intangible capital valuation

Valuing Intangible Capital

Sometimes what counts can’t be counted and what can be counted doesn’t count.

Albert Einstein

Intangible capital, particularly the valuation of companies, is a hot topic given that the French economy is 86% intangible. Intangible capital has a considerable impact on global economic activity. Do you want to invest in a company that has been in existence for a long time or is just starting up? Know that intangible capital is the 1st lever of value creation in organizations.
The best practice to value a start-up is to build a winning strategy by creating as many options as possible, and at the same time, minimizing the risks. On the other hand, there are some mistakes to avoid. Often, they are mostly committed for fear of losing control of their company.

What is intangible capital?

The value of a company is rarely equal to its book value. Intangible capital is everything that is neither financial nor material and that does not appear in the assets. There are three main categories of intangible capital:

  • Human capital;
  • Internal structural capital;
  • External relational capital;

Did you know that between 60% and 90% of your company’s value is based on its intangible assets? Take for example UBER, the largest cab company with zero vehicles! UBER is the perfect example of a company that makes its wealth ‘without materials’.
In order to live and to develop, any company needs financial resources, especially in the long term, which it obtains by selling new shares, the price of which is difficult to evaluate, making the question of the valuation of companies key.

But what exactly is the valuation of a company?

Intangible capital, particularly the valuation of companies, is a hot topic given that the French economy is 86% intangible. Intangible capital has a considerable impact on global economic activity. Do you want to invest in a company that has been in existence for a long time or is just starting up? Know that intangible capital is the 1st lever of value creation in organizations.
The best practice to value a start-up is to build a winning strategy by creating as many options as possible, and at the same time, minimizing the risks. On the other hand, there are some mistakes to avoid. Often, they are mostly committed for fear of losing control of their company.

What is intangible capital?

The value of a company is rarely equal to its book value. Intangible capital is everything that is neither financial nor material and that does not appear in the assets. There are three main categories of intangible capital:

  • Human capital;
  • Internal structural capital;
  • External relational capital;

Did you know that between 60% and 90% of your company’s value is based on its intangible assets? Take for example UBER, the largest cab company with zero vehicles! UBER is the perfect example of a company that makes its wealth ‘without materials’.
In order to live and to develop, any company needs financial resources, especially in the long term, which it obtains by selling new shares, the price of which is difficult to evaluate, making the question of the valuation of companies key.

But what exactly is the valuation of a company?

Valuing is making the link between its past, its history, its future and its potential, to decide how to act.

Mauhin, 2015

The valuation of a company is a more or less complex subject. Valuation consists in evaluating in a precise way several elements registered in the company’s balance sheet. These elements can be either assets or liabilities and must be evaluated independently and separately from each other. The valuation of these items can be followed by a revaluation for more accuracy while applying relevant methods.

Regarding the hidden values of the company

Intangible capital is an invisible concept. In other words, the intangible capital = the total value of the company – the tangible capital. The highlighting of the hidden values of a company is based on experience, commitment, general atmosphere, well-being, credibility, motivation, vision, charisma of the boss, passion for the job, communication, performance, stakeholders, the management system and team spirit. These are the components of intangible capital that have a real impact on the value of a company.
Moreover, the intangible assets of a company can be classified into 9 main categories, customer capital, human capital, partner capital, knowledge capital, reputation capital, organizational capital, information capital, ecological and societal capital and shareholder capital.

What is the valuation of a company’s intangible capital?

The valuation of a company is often the result of calculations linked to the anticipation of the company’s future earnings. Whatever the method used, the valuation of a company’s intangible capital is a difficult task. Intangible capital represents the hidden wealth of a company based on brands, patents, know-how, technology, information systems etc…., as well as an important fraction of its general and global value. According to the World Bank, intangible value represents more than 86% of the French economy. This value is the key to any company’s wealth. This wealth is based on: customers, knowledge, partners, society, the environment, the brand, shareholders, the general and structural organization, information systems, as well as on the human being.

Importance of evaluating and valuing intangible capital

The financial valuation of a company’s intangible capital is a key step in raising funds and involves the evaluation of this intangible wealth. Together, they allow us to ensure that the company’s performance is in good shape. Valuation of intangible capital allows to give more transparency to resources, to control the quality of intangible assets and to evaluate and anticipate the impact of action plans and strategies. The evaluation and valuation of the company’s intangible capital is based on a detailed study of all strategic assets.

What are the methods used to value intangible capital?

The valuation of a company’s intangible capital aims to evaluate everything that does not appear on the balance sheet, and yet constitutes the value of the company. The steps of the valuation of the company’s intangible capital are the following:

The mapping of intangible capital

The mapping of intangible capital is the first step in valuing this capital. Mapping enables the definition of the characteristics and particularities of each component for an easier evaluation. Each component is then broken down into a number of sub-elements (indicators).

The indicators form 3 categories: The general ones for all companies, the specific ones for a particular sector of activity and the specific ones for the company under study. The indicators allow to evaluate and assess the qualities and potentials of intangible resources.

Dynamic analysis of intangible capital

The intangible value of a company is not only an addition of assets, it is also the capacity of the company to improve, to develop and to set up an action plan and an effective strategy while making the assets interact. This valuation stage therefore consists of looking for indicators that evaluate the interactions between the various components and that perfectly reflect the company’s development capacity.

Intangible Capital Value is a precursor and implements a real time external and internal monitoring with several different trades:

  1. Updating scenarios: cash flow, risks, strategy and increasing the robustness of the data,
  2. Time saving (142 days of paperwork per year on average per country): internal and external communication secured by a number that makes traceability possible
  3. Research and development: documentation (black book) and protection of strategic information with the possibility of escrow and security trust,
  4. Monitoring: strategic monitoring software for decisions and control of the solution/product pair,
  5. Business Continuity: deliver and invoice the customer no matter what happens with our operational guarantee solution,
  6. Insurance and contract library: transfer vital risks to an insurance company and follow-up of contracts by one of our partner lawyers on the principle of negotiation – signature – management,
  7. ICV app www.icv-app.com : consolidation of information in real time or regularly for a 24/7 access and a reactivity necessary for a successful trajectory,
    The conjunction of the “Watch” parameters allows to provide the managers with a real time and dematerialized visibility to be agile, to maintain its cash flow, to divide its “entrepreneurial” risk and to convince its financiers and protect its investments.

The evaluation and qualitative valuation of intangible capital

Generally, intangible capital cannot be valued in a quantitative way, but rather in a qualitative way. Indeed, the wealth of intangible capital is based on its follow-up over time and on the sustainable improvement of its quality.
Finally, the valuation of a company’s intangible capital can only be established following a financial evaluation taking into account the context, the model and the unique assets of this company.

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