I spoke about the value of “sleep-happy” business to get people thinking about how to build asset-rich enterprises, even at the early stages when focus tends to be on product development, financing and finding customers.
Some people stop getting paid when they sleep, some people get paid while they sleep
Strong brands are valuable intangible assets. Asset owners get paid while they sleep – or rather earn substantially more than those without a brand, producing goods and services using relatively the same time and skills. That is why graffiti artwork by Bansky will fetch impressive prices at auction while the work of other talented artists safely remains available to be seen on the streets of Paris, Rio and pretty much anywhere art can be cleverly conjured up with a can of paint.
What is not a brand and therefore not an asset is a commodity. And there is nothing wrong with commodities, except it is very difficult for a commodity seller to be sunning themselves somewhere on a white sandy beach while earning residual income. When the shop front closes and the gone fishing, skiing or in our case snoozing sign goes up, the cash registers fall silent. In other words, the time not spent or units not sold will result in an equally deficient bank balance. The extra money a brand is able to earn you for the finite resources – time and units – acts like interest earnings in a savings account, giving you back more than you put in over time.
SLEEP? – The things to remember
So here goes today’s mnemonic…
Substance – your brand is much more that the surface visual elements of logos, colours and design arrangements. With your customer at the centre, it is worth thinking about how you convey Distinctiveness, Quality, Reputation and a Future Expectation – customers and potential investors will form a perception of what to expect from you now and in future and whether you are likely to deliver reliably.
Legal literacy – many small business owners have not been exposed to important information on protecting, managing and exploiting their intellectual property (IP). Apart from not properly securing their competitive advantage, they also miss out on opportunities to generate more value in their businesses. The British Library Business & IP Centre and the UK Intellectual Property Office offer many free useful resources and are a great place to get basic literacy on IP and other legal matters. At the very least, every business owner should know about and decide whether or not to register a trademark in the territories where they operate.
Exit Strategy – Yes you are working hard to build a business you love and are in it for the long run. However, thinking like an investor helps you identify the customer goodwill, business processes, data, associations etc. that will increase in value over time. Ask yourself, “If I were to sell my business today, what would I be selling?” In other words, where does IP and other intangible value arise providing the potential to earn you a huge return in future – whether you’ll be selling or simply taking well-earned time off.
Expansion – Even though you may be a small business now, you need to constantly think about how you can scale. Without you in the picture – as suggested, chilling out somewhere nice – how can what you are doing now be replicated, augmented, scaled? Build your business with a view of separating yourself from it so that it can pay you back. Investing in developing a strong brand is one way to do it.
Positioning – Know your quarter and occupy it. Be clear on which area in the market you are going for. Although a brand’s positioning happens in the mind of the customer, you need to introduce and present yourself appropriately to the relevant market segment. In his fantastic book, Star Principle, Richard Koch places emphasis on finding a niche in addition to selecting a high growth market and a gap in the market in order to build a star business. He lists over 25 things to trigger thoughts about articulating the niche you intend to lead.
Is it worth doing?
The value associated with brands and other intangible assets of many established enterprises well surpasses physical assets. According to a recent WIPO report, in 2013 the world’s top ten companies had brand values as a percentage of market capitalization ranging from 20% to close to 50% with one valuation for McDonalds at a staggering 94% and another for Apple at 58%. It is evident that brands are important assets and as an individual business owner, you would do well to take a long term view on the matter with regards to your own situation. You’re working hard on your business now anyway, there is nothing stopping you from incorporating some smart strategies and who knows, you might build the next big brand!