The triad of brands, goodwill, and know-how has no slots in financial statements, and therefore tend to be left out in formal business valuation. Yet, they can spring nasty surprises on an investor, and leave a seller in hopeless recrimination as well! The value of brands is relatively well known, but finance professionals, who generally lead business valuation exercises, are usually at a loss to discern trends in rank, image, and margins. You might think that accountants can apportion contributions to individual lines of revenue, but there could be many operational realities, such as the time of sales people, which are misleading in business valuation exercises.



Even the most qualified and experienced professionals can be guilty of subjective bias when it comes to the goodwill aspects of business valuation. It may appear wasteful at first sight to invest in an objective survey with a duly stratified sample, but a reliable basis for estimating the effect of goodwill in business valuation can prevent costly and irreversible mistakes. Overly enthusiastic backers or opponents of a specific business valuation exercise may try to use benchmarks and market precedents to support their points of view, but your capital deserves more specific proof!

Know-how is perhaps the most elusive of the drivers of commercial worth, which weigh down efforts to determine the true worth of an enterprise. Technologists in dark corners of a company may not only substitute weak in-house processes, but represent enormous potential if deployed effectively. This sword has two edges, because key people may leave after a business changes hands. You can be sure that top guns will lobby hard to save their jobs, but the real value may reside in the engine room of your proposed acquisition. Due diligence should never leave out distant sites and the ?innards? of an organization.