7 minute read

How Digital Assets and IP Impact Your Business Value

Whether you own a local restaurant, retail store, or service business, digital assets and intellectual property (IP) have become key elements that can increase your company's value when it's time to sell. From your business trademark to your website and customer database, these intangible assets often represent significant value for potential buyers. While determining the worth of your equipment and inventory might be straightforward, understanding how to value your digital assets and IP requires careful consideration.

When preparing to sell your business, you'll need to consider how your digital assets affect future revenue projections, what value your intellectual property rights bring to a potential buyer, and how to demonstrate the worth of your online presence and customer data. Having clear answers to these questions helps you and potential buyers make informed decisions about the true value of your business's digital and intellectual property assets.

Types of Digital Assets to Value

Every small business, whether a neighborhood café or a local consulting firm, has digital assets that can increase market appeal during a business sale. Remember to include the following items during the valuation process.

Websites and Domains: Your business website and domain name serve as the primary hub of your online presence, often representing the first point of contact for customers. A well-established online presence adds significant value, even for traditional brick-and-mortar businesses.
E-commerce Capabilities: Online ordering or booking systems represent ready-to-use platforms that offer immediate value to buyers who want to hit the ground running.
Social Media Presence: Active accounts with engaged local followers demonstrate valuable community connections that a new owner can build upon.
Customer Data: Email lists and purchase histories provide invaluable resources for targeted local marketing and maintaining customer relationships.
Digital Content Library: Photo galleries, blog posts, customer reviews, and other content that showcases your business's reputation and expertise.
Custom Software and Apps: Specialized operational tools, such as unique scheduling systems or customer management platforms, can be significant selling points.
Digital Processes: Established systems for managing inventory, scheduling, or customer service make your business more attractive to buyers seeking turnkey operations.
Online Advertising Accounts: Google Ads and social media advertising history demonstrate proven marketing strategies and customer acquisition costs in your local market.
Digital Intellectual Property: Your business name, logo, and unique digital content, along with their associated trademarks and copyrights.

Valuation Methods for Digital Assets

Small business owners can use several practical approaches to determine the value of their digital assets. Like traditional business valuation, digital asset valuation often combines multiple methods to arrive at a fair market value:

Market-Based Multiples: Consider how your digital assets impact your overall business value. Businesses with strong digital infrastructure and online revenue streams often command higher multiples. When valuing your digital assets, examine how they contribute to the earnings that drive these higher multiples, such as through online sales channels, automated systems, or digital customer relationships.
Cash Flow Analysis: Calculate the earnings generated through digital channels, such as online ordering systems, website leads, or digital advertising. This method ties digital assets directly to your business's cash flow, helping determine how much of your seller's discretionary earnings (SDE) comes from digital operations. Track metrics like conversion rates, customer acquisition costs, and lifetime value of digital customers.
Replacement Cost Method: Consider what a new owner would need to spend to recreate your digital infrastructure from scratch. Include both hard costs (website development, software licenses) and soft costs (time to rebuild social media following, recreate content, restore search engine rankings). This approach is particularly relevant for businesses with custom software or extensive digital content libraries.
Market Comparison Approach: Research recent sales of similar businesses with comparable digital assets. Focus on businesses in your industry that have similar digital capabilities and market reach. Pay attention to how digital infrastructure affected their final selling price, particularly in cases where the business had strong online revenue streams.
Income Potential Analysis: Similar to the capitalization of earnings method used in traditional business valuation, project future earnings from your digital assets. Consider growth trends in online sales, digital advertising revenue, and other technology-driven income streams. Factor in market trends and the increasing importance of digital presence in your industry.

Digital Asset Documentation

Proper documentation of your digital assets helps justify their value to potential buyers. This includes maintaining detailed performance records of website traffic, social media engagement, and online review ratings. Revenue data should clearly connect digital assets to actual income, such as tracking online sales or appointments booked through your website.

Comprehensive documentation should include a detailed inventory of all digital assets, along with login credentials and ownership documents. Customer database statistics and email marketing performance metrics provide evidence of your market reach, while development costs and maintenance records for custom software or apps demonstrate your investment in these tools.

Transfer Considerations

Transferring digital assets during a business sale may seem simple, but it requires careful planning. First, check that your IP portfolio complies with data protection laws like GDPR or CCPA, and review contracts to ensure assets can be transferred legally.

Platform policies often dictate how assets like social media accounts or domain names can be transferred. Familiarize yourself with these rules to avoid complications. For example, some platforms prohibit account transfers outright, while others include steps for updating ownership details, passwords, and contact information.

Preparing for the new owner's success is another key step. For custom software or complex e-commerce platforms, consider offering training to help them get up to speed. Use secure methods like encrypted communication to protect sensitive data during the transfer, including sharing credentials safely.

Finally, remember the importance of clear communication with customers. Keeping them informed if the transfer affects their experience can help maintain trust and support a smooth transition.

Remember, well-documented and properly valued digital assets can significantly increase your small business's appeal to potential buyers. By understanding and effectively presenting these assets, you can better position your business for a successful sale. For an in-depth look at the transfer process itself, be sure to review our comprehensive guide on transferring digital assets and IP when selling your business.

BizBuySell has many tools and resources to help you value a business, whether you're buying, selling, or just looking for a market valuation: