An owner came to us with a task he framed himself as "value the thing that cannot be valued." The business generates revenue and buyer interest, but its balance sheet is almost empty: no real estate, no equipment, no inventory. All the value sits in the technology, the brand, the accumulated data and the portfolio of rights. The team is four people. The buyer was naming one number, the seller a number several times higher. We needed to bring the parties to a defensible value that would survive both the negotiating table and due diligence.
This is a fictional case assembled from real practice - with no names or identifying details. It shows how we approach valuing assets where there is almost nothing tangible and most of the value is hidden in the intangible. Below is the logic, the methods and exactly how we defended the final figure.
Why the classic approaches stall here
The first trap is to look at the balance sheet. The book value of intangibles is almost always understated: under accounting rules, internally created brands, technology and customer bases often do not make it onto the balance sheet at all. Formally, the asset is "worth" only what was spent on registration fees and contractors. Economically, it is worth many times more.
The second trap is to look for direct comparables. There are few public deals involving similar assets, and the ones that exist are poorly comparable: a different stack, a different stage, different terms. A pure market approach yields a band too wide to rely on by itself.
When the value rests on technology and expertise, and the team is four people, the departure of one or two key employees can wipe out a significant part of the value. This is not an abstraction but a factor that directly affects the discount rate and the final price.
Step 1. Inventory: what exactly we are valuing
Before counting, we broke the "intangible" down into separate assets. A vague "we have great technology" cannot be valued - what gets valued is a specific right or the cash flow it generates.
Architecture, source code, registered software, know-how. We documented exactly what is protected, who owns the rights and whether there are any "holes" in their transfer from contractors and employees.
Trademark, domain, recognition, organic traffic. The brand is valued separately from the technology - it has its own economics.
The accumulated dataset and its uniqueness: can it be reproduced from scratch, was it collected lawfully, are there consents in place. Data that cannot be used legally adds no value.
Patents, applications, licences, contracts. We checked terms of validity, territory of protection and encumbrances.
Without clean legal title, valuation turns into fantasy. If the technology cannot be lawfully transferred to the buyer, its market value for the deal tends to zero - no matter how much money it brings in today.
Step 2. Three approaches - and why all of them are needed
For an asset with a high share of intangibles, no single approach is convincing on its own. So we ran all three and reconciled the results: this gives a range and shows which value driver is decisive.
| Approach | Logic | Where we applied it | Limitation |
|---|---|---|---|
| Cost | What it would cost to recreate the asset from scratch | The lower bound: the "floor" value of the technology and data | Ignores income and time to market |
| Market | Prices of comparable deals and multiples | A sanity check: do we fall within the market band | Few comparable deals, wide dispersion |
| Income (DCF) | Present value of future cash flows | The primary calculation of the final price | Sensitive to the forecast and the discount rate |
Within the income approach, for the brand and the rights portfolio we additionally applied the relief-from-royalty method: we estimated how much the company would pay to license its own brand and technology if it did not own them. The saved payments, discounted to today, are exactly the value of the corresponding intangible asset.
Step 3. What we built into the rate and the forecast
The income approach is only as good as the honesty of its assumptions. For an asset like this, the key is not to paint a pretty growth curve but to reflect the real risks in the discount rate and in the forecast itself.
- Key-person risk. The value is tied to the founder. We added a premium to the rate and separately worked out the mechanics of retaining the team as a condition of the deal.
- Lifespan of the advantage. Technology becomes obsolete. We limited the forecast period to the horizon over which the advantage can realistically be held, rather than to "forever."
- Strength of the rights. The more robust the IP protection, the lower the risk of copying and the milder the discount. Weak protection means a higher rate.
- Low liquidity. Such an asset is hard to sell quickly, so we applied a discount for illiquidity.
We do not understate the value out of caution, nor inflate it for the seller's benefit. Every premium added to the rate and every discount has a written justification - and that is precisely what later withstands the buyer's scrutiny.
Step 4. From calculated value to deal price
Calculated value and deal price are not the same thing. From the base income-approach valuation we moved to the negotiated price through a transparent chain of adjustments that both parties could see.
Such an "adjustment map" removes the main pain of negotiations: the argument is not about the final figure on a "like it / don't like it" basis, but about specific parameters. The buyer disputes not the price as a whole but, for example, the size of the discount for key-person risk - and that is resolved through the structure of the deal: instalments, an earn-out, retention of the founder for an agreed period.
A good valuation of an intangible asset is not a single number but a defensible line of reasoning. A number can always be disputed; reasoning can only be improved.
How the case ended
The parties converged within a justified range. Part of the price was tied to retaining the founder and hitting targets in the period after the deal - this closed the buyer's main fear and at the same time gave the seller a chance to reach the upper bound of the valuation. The "five times apart" dispute turned into a concrete conversation about parameters, not about faith in the asset.
An asset with no machines or warehouses is valued just as rigorously as a factory - the tools are simply different: an inventory of rights, three approaches for cross-checking, relief-from-royalty for the brand and IP, an honest discount rate and a transparent map of adjustments down to the deal price.
Need to value an asset that's "not on the balance sheet"?
G-Invest values businesses and intangible assets - technologies, brands, data and IP - and prepares a justification that holds up in negotiations and the buyer's due diligence. We will help bring the parties to a figure you can defend.
Frequently asked questions
Can you value a company that has almost no assets on its balance sheet?
Yes. The book value of intangibles is almost always understated, because internally created brands and technology often do not appear on the balance sheet. The valuation is built on economics - future cash flows and the value of individual rights - rather than on accounting figures.
Which approach is the main one for technology assets?
The primary one is the income approach (DCF), since it is the cash flow that creates the value. But we always add the cost approach (the lower bound) and the market approach (a reality check), so the result does not rest on a single assumption.
What is the relief-from-royalty method?
It is a way to value a brand or IP through a hypothetical licence: how much the company would pay for the right to use the asset if it did not own it. The savings on those payments, discounted to today, are the value of the asset.
How does the risk of a small team affect the price?
Directly. Concentrating value on one or two people raises the discount rate and lowers the valuation. This risk is closed through the deal structure - an earn-out, instalments and conditions for retaining key employees.