In owning a business, you take responsibility for an entity separate from yourself. Daily, you make operational and strategic decisions on behalf of the entity to increase revenue and serve your customers. The goals you pursue are a means of creating business value. The value, though, arises from the cash generated by the business and the care and protection of the business’ assets. Just as you require physical, intellectual, and spiritual growth and protection, so does your business. The growth and protection you provide to your business creates a body of assets with transferrable value when you are no longer a part of that business.
Decisions in your business will center around growing and protecting the physical assets, the intangible assets, and the business’ relationships. Here’s how to leverage assets and relationships to build value for your business:
Physical assets such as equipment and inventory are the easiest assets to understand. They are tangible and easily transferrable. Managing these assets for long-term durability and safekeeping through insurance protects them and helps them retain value. Physical assets also have cash flow and tax implications, contributing to business value if managed correctly.
Intangible assets such as the business’ trade names, reputation, and intellectual property are uniquely valuable. Because intangible assets are inextricably linked to the company itself and to no other company, they are immensely valuable. Intangible assets, such as trademarks, copyrights, patents, trade secrets, and customer lists, though, are only valuable when properly protected. Formal registration processes and protective agreements in contracts are critical to maintaining and growing the value of intangibles.
Relationships in business create value, especially where the relationships are unique and protected by contracts. If your business has secured a key vendor, customer, or employee in an exclusive contract, that relationship has transferrable value as an asset of the business. The more secure the relationship, the greater the value.
Decisions you make as the steward of your business entity are important to developing these assets into a value bundle that will pay off when you are no longer in the business. Remember, as Michael Gerber, author of “The E-Myth” states: “The entrepreneur builds an enterprise; the technician builds a job.” You’re out to build an enterprise — an enterprise that ultimately rewards you for your careful care, protection, and investment in its future.
You are not alone – Speak with an attorney to discuss your business’ strengths and risks for physical assets, intangible assets, intellectual property, formalized contacts, exit and succession planning, and much more. Contact us at 425-250-0205 or firstname.lastname@example.org.
Legal Disclaimer: This article contains general information. Do not view this article as legal advice. Talk with counsel familiar with your unique business needs before taking or refraining from any action.
Original post published July 7, 2009. Updated January 26, 2021.