In my previous blog post, I argued that reputation, if converted into brands/trademarks, can be the most valuable asset for a company. While all companies claim to have “brand”, typically the company’s name but it is mostly a sign on the door and has not considered a key access. . These companies are “ME” companies; i.e. companies that are successful due to its founders. Such a company is saleable, but only for a fraction of what could have been made if the owners had realized the power of building a brand based company.
As an example of a company that has been focused on its brand is, Zipcar which was just sold for $$500 million. If you were to analyze the transaction according to the criteria mentioned in my previous post, you would find that Avis essentially paid a half a billion dollars for a trademark.
Is Avis crazy? I don’t think so. Let’s break it down:
Was Avis buying management? No, they will quickly be replaced. Inventory (cars)? No, Avis can buy vehicles cheaper than Zipcar is able to. How about systems? No, Avis’ reservation system is far more powerful. What about income? This is unlikely since Zipcar lost money all but one quarter. Could Avis have been after customer lists? Yes, but only if these customers keep coming back. This leaves only reputation. Was Avis buying reputation? Bingo!
Zipcar is the figurative Ronald McDonald of car rental. Ronald is McDonald’s entre to “get ‘em while they are young”. Zipcar has an amazing following which consists of young urban groups and college students. These populations are drawn to hip ideas, which instill loyalty. Currently, Zipcar’s followers may not have a lot of money; but they are likely to grow into corporate car renters. So, if Avis can maintain that population, it will inherit an entire population of loyal renters.
Are you having trouble identifying Zipcar’s relevance to your company? I can provide you with dozens of examples. They are always the same: buyer pays phenomenal amounts of money for companies that have built strong brands and own them.
Remember: reputation itself is not transferable. Reputation has to be converted into an ownable, strong intellectual property assets (trademark registrations) prior to the sell. Most privately held companies do not own any of the brands associated with its company, but instead are owned by other companies.
So, is the Zipcar brand worth $500 million? Right now, that doesn’t matter What matters is that they and many others are paying top dollar for intellectual property assets. The important question for your business is: what needs to be done in your company to become an intellectual property based company that results in a big payday?