How to put your brand on the balance sheet

As a growing small or medium-sized business, you've probably poured time, money, heart and soul into building your brand, whether that's a trusted reputation, a recognisable logo, or a strong social media presence. Yet, not everything that counts can be counted on a balance sheet.

It is nevertheless widely accepted that brands do add value. A brand that is well-established can directly translate into higher revenue, market share, or a competitive edge to stand out in a crowded market . So, it's no surprise that investors and buyers often pay a premium for businesses with strong branding.

However, the rules of accounting don't always reflect this reality. In accounting terms it's a bit of a blind spot. And that's what's so frustrating. When it comes to financial statements, none of that brand value appears on the your balance sheet.

Under current UK accounting standards, intangible assets like brand value can only be recognised on the balance sheet if they've been purchased. For example, as part of a business acquisition. Whereas, if you've built your brand yourself, (as most SMEs do), that value is considered internally generated and can't be capitalised. Instead, the money you spend on marketing, design and other brand-building activities is recorded as an expense, so reducing your profit. This can make it harder to show the full value of your business.

So how can that value be reflected in your business's financial statements? In accounting terms, how can you put your brand on the balance sheet?

While you can't put your home-grown brand on the balance sheet, there are still ways to highlight its value:

• Track your brand investment - Keeping a record of your brand-building spend can help when you're justifying your valuation to stakeholders.
• Gather evidence  - Customer surveys, brand recognition statistics and pricing power can all demonstrate the strength of your brand.
• Consider valuations - If you're looking for investment or planning to sell, it can be hard to show your business's full worth. A professional brand valuation might not change your accounts, but it can add weight in discussions with investors or buyers.
• Think about IP protection - Protect what you've built. Trademarks and other forms of intellectual property can be accounted for in some cases, especially if they're separately identifiable and have measurable future economic benefits.

All in all, for many SMEs, the brand is the business. It's one of your business's most important assets. But just because it's not on the balance sheet doesn't mean it's not adding serious value. The key is to recognise its worth, keep building it, track its impact and speak to your accountant about how best to reflect it in your business story.

At GSM we know the value of a strong brand. If you'd like to talk about how branding and other intangible assets could factor into your growth and long-term strategy, call us on 020 7935 3793