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In The Winery

               methods to determine the asset’s value.

                              Brand Awareness

                 One asset that could be harder to put a value on is
               the company’s brand. It is an intangible that could
               be worth more than all of the physical property and
               inventory of the company. There are three meth-
               ods to determine a brand’s value, and they are
               sometimes used together.

               •  The first is to calculate the replacement cost
                  of the brand. Basically, this involves formulat-
                  ing how much time and money it would take
                  to re-create the brand from scratch, which are
                  divided into three subsections:

                  Brand Identity: Covers all items used to create
                  and develop the brand’s identity, including the
                  name, designing the logo, novel bottle designs,
                  trademark and legal fees, websites and choos-
                  ing a color palette.
                  Brand Awareness: The cost of advertising, pro-
                  motion and publicity campaigns for the brand to
                  achieve its current level of market awareness.
                  Market Position: This is the cost of retaining the
                  business’s current clientele and includes adver-
                  tising, discounting with distributors, and build-
                  ing relationships with retailers.

               •  The second is comparable pricing. This method
                  requires researching the sale of similar brands
                  and using that as the foundation for a valuation.
                  This can be a challenge if there are little or no
                  sales of similar assets.

               •  The third and final method is an income-based
                  approach, also known as an “in-use” approach.
                  This involves calculating the future earnings that
                  can be directly tied to the brand to determine
                  its value. The formula looks at everything from
                  income to cash flow to cost savings generated
                  from the brand.

                                   Sell High

                 If a winery owner’s family is not interested in
               maintaining the business, selling is the other

               877-892-5332                    The Grapevine • January - February 2022                             Page 7

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