The hidden power of intangible assets

You know what a brand is. Perhaps you’re familiar with intellectual property. Maybe you’re curious about what’s going on with non-fungible tokens (NFTs). Or why people keep saying data is the new oil.

All of these are intangible assets. And yes, we know. The term 'intangible assets' might have you scrolling away with an “ugh, too hard!” We totally get it. If it's not about immediately running your business, it just doesn't seem relevant.

But here’s the zinger: what you work with day-to-day in your business are intangible assets.

The website or app you’re using to read this is an intangible asset. Your team is an intangible asset. Your customers. Your processes. Intangible assets. Nearly everything in your business, when you look hard enough, is an intangible asset.

Intangible assets are everywhere. And they are absolutely essential to your business's success. Ignoring them – and their potential value – could see your business fail, fast.

Intangible assets have a pretty massive scope to change a business's outlook. Things are changing, from digital services to AI, the knowledge economy and regulatory changes. Which means the impact of intangibles on business performance is only going to increase.

So let’s take some time to get comfortable with intangible assets and explore why they might turn out to be your best friend.

What are intangible assets, really?

Let's start with the 'intangible' part. Intangible means that the asset is non-monetary and non-physical. But that doesn't mean they're not real. Intangible assets have real value and real impact.

What about the 'asset' part? In accounting terms, an asset is something that’s capable of generating future economic value. It can be sold, rented, licensed, used as security for a loan, that kind of stuff. Which is awesome right? Everyone needs more assets in their life.

With an asset, it just needs to be capable of generating future returns. It doesn't need to be generating returns right now.

Say, you own a property that you don’t live in and haven’t rented out (lucky you). Even though it’s not rented out right now, the fact that it’s capable of rental adds to its value. That capacity adds value to the asset. You could describe intangible assets as the software of the business world, as opposed to the tangible hardware. Like tangibles, they help your business generate returns. 

It's not an understatement to say that these non-monetary, non-physical assets might be your main source of revenue, even as we speak. In fact, for many businesses they are practically the only source of consistent returns.

More than essential, intangible assets are the primary drivers of business performance, growth and valuation. They are the unsung heroes of that business plan that… hmmm, you haven't got around to writing.

Yes, we know what it's like to be too busy working in your business to work on your business.

Give me some more examples, please.

It's worth taking a look at intangibles to set your business up for success. The good news is you're not starting with nothing. Right now, we're willing to bet your business has a few of the following intangible assets in its favour:

• your business and product brand
• your personal reputation
• your team
• how you get things done
• the data your business works with.

You might also count your culture, the organisations and businesses you work with, your unique knowledge about how your industry works, and much, much more. And some of those ideas that you have about what you could do next? They're intangible assets in the making.

Here’s where it gets trickier.

Intangible assets are generally only worth anything when they're part of your business.

Intangible assets make your business more valuable overall. But you can't put a for sale sticker on most of them, unlike furniture in your house. They are more like the kitchen - pretty much part of the house itself. So all intangible assets need to be considered in context. Specifically, in the context of your overall business. Which means you can't know the value of one just by saying you own it.

The trickiness of intangible assets doesn't stop there. Most intangible assets are much harder than tangible assets to protect. Almost as hard to protect and trace as money. That's because intangible assets can be very easy to copy. Or to move. Or to scale. Or to disappear.

While this can work in your favour when you use intangible assets to scale your business at next-to-no cost, it also means that your intangible assets can end up anywhere, including in your competitor's business. Other businesses might even put your intangible assets to better use, if you're not careful, making yours less relevant, and less valuable than they were.

We share more about how to protect your intangible assets in some of our other blogs.

Applying an intangible lens to growth.

Despite the challenges, looking through the lens of intangible asset growth gives you, well, if not rose-tinted glasses, then a rosier outlook. Let's take a moment to contemplate the view.

Businesses that have invested in building their intangible assets are, hands down, outperforming their peers. They grow faster and have more impact with stakeholders. They are around longer, and generate higher returns for shareholders. They are more valuable businesses to investors and buyers.

The cool thing? If you invest in and build your intangible assets, they'll help your business outperform too. And it's never too late to start.

How do I get a handle on my intangible assets?

We’re so glad you asked. Because you’re in the right place. That's why we're building hyfen8 for businesses like yours. A self-service smart platform to help businesses and their advisors assess and build intangible asset value.

Want to learn more? Explore the eight different categories of intangibles.