Investors: Why branding matters to your bottom line

PUBLISHED: January 4, 2023

Why worry about branding a company just to sell it?

If you’re in the market to sell your business, or you’re streamlining your investment portfolio, you need to worry about branding. It’s an investment that can make the difference between staying in the black or going red, and getting the highest dollar for your sale.

Branding can create value for companies that are looking to be acquired by making the company more attractive to potential acquirers. A strong brand signals to acquirers that the company has a loyal customer base, a solid reputation, and a clear identity. This makes the company more appealing during an investor acquisition search. They will see the brand as a valuable asset that drives future growth and revenue.

Higher Shareholder Revenue

According to a study by the consulting firm Interbrand, strongly branded companies outperform their peers in terms of financial performance. The study found that the total shareholder return of the top 100 global brands was almost three times higher than the return of the S&P 500 over a 10-year period. This strongly suggests strong brands contribute to the overall financial success of a company and make it more appealing as a potential acquisition.

Stronger Customer Loyalty

A strong brand also drives customer loyalty. That translates into increased sales and revenue. According to a survey by the consulting firm Bain & Company, companies with a strong brand can have up to three times stronger customer loyalty than their competitors. Therefore, strongly branded organizations are far more likely to generate predictable revenue streams. In turn, they become more attractive for a potential investor acquisition or private equity transition.

Higher Valuation

Financial performance and customer loyalty benefits aside, strong brands also help increase a company’s valuation during the acquisition process. A study by Brand Finance, a consulting firm, found the value of a company’s brand accounts for up to one third (1/3) of its overall value. This suggests that strong brands significantly increase the value of a company when it is being acquired.

Investment Portfolio Branding is a Must.

Overall, great branding creates the low-hanging fruit of up-front value and a undoubtable polish that pique investor interest when building their portfolio of businesses.

If you’re an organization looking to be acquired or an owner planning a windfall exit, make sure your branding is on point. Clear messaging, a consistent collection of visual assets, proven processes, and a devoted following are all part of that strong brand, and will outshine competitors in the marketplace by strengthening customer loyalty, enhancing revenue generation, and increasing acquisition valuation.

 

References:

Interbrand (2020). “Best Global Brands 2020.”

Bain & Company (2019). “The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World.”

Brand Finance (2019). “Brand Finance Global 500 2019.”

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About Brand Poets

Founded by Tana M. Llinás, Brand Poets is a collective of strategists, storytellers, and digital artisans crafting smart, poignant brands that command attention.

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