How to Value Intangible Assets During a Sale
When founders think about valuation, they usually start with the tangible. Revenue. EBITDA. Growth rate. Assets you can point to on a balance sheet. But in many modern businesses—especially services, technology, SaaS, media, and consumer brands—the real value doesn’t live neatly in a spreadsheet. It lives in things that are harder to define, harder to quantify, and far easier to misunderstand.
Those things are intangible assets.
I’ve seen founders dramatically underestimate the value of their intangibles—and I’ve seen others wildly overestimate them. Both mistakes come from the same root problem: assuming intangible value is either automatic or immeasurable. It’s neither.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I make a simple but critical point: buyers absolutely care about intangible assets—but they value them very differently than founders do. And if you’ve listened to the Legacy Advisors Podcast, you’ve heard Ed and me talk about how intangible value is often where deals are won or lost quietly, during diligence, not negotiation.
Understanding how buyers evaluate intangibles—and how to make that value visible, defensible, and transferable—can materially affect outcomes. Not just price, but structure, certainty, and confidence.
First, What Counts as an Intangible Asset?
Intangible assets are non-physical assets that contribute to a company’s ability to generate future cash flow. They don’t sit cleanly on the balance sheet, but buyers are acutely aware of them.
Common intangible assets include:
- Brand equity and reputation
- Intellectual property (IP)
- Proprietary technology or processes
- Customer relationships and data
- Contracts and partnerships
- Domain expertise and know-how
- Trademarks and trade names
- Software, algorithms, and data models
- Organizational culture and systems
- Market positioning and credibility
The mistake founders make is treating these assets as self-evident. Buyers don’t assume value—they verify it.
The Core Question Buyers Ask About Intangibles
Buyers don’t ask, “Is this valuable?”
They ask, “Is this transferable, durable, and defensible without the founder?”
That single question drives almost every valuation decision around intangibles.
An intangible asset only has value if:
- It survives ownership transition
- It doesn’t rely entirely on specific individuals
- It can be protected legally or operationally
- It contributes predictably to cash flow
If an intangible asset disappears when the founder leaves—or can be replicated easily—it will be discounted heavily, no matter how impressive it feels internally.
Brand: Valuable Only If It Drives Behavior
Founders often point to brand as a major source of value. Sometimes they’re right. Often they’re not.
Buyers don’t value brand because it’s recognizable. They value it because it influences behavior in measurable ways:
- Customer acquisition efficiency
- Pricing power
- Retention and loyalty
- Trust and credibility
- Reduced sales friction
A strong brand shows up indirectly in the numbers:
- Higher margins
- Lower churn
- Shorter sales cycles
- Organic inbound demand
If your brand doesn’t materially affect those outcomes, buyers will see it as marketing—not an asset.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that brand value must be evidenced, not asserted. Saying “we have a strong brand” is not enough. Buyers want proof that the brand does work.
Intellectual Property: Protection Matters More Than Innovation
Intellectual property is one of the most misunderstood categories of intangible value.
Founders often conflate:
- Innovation with protection
- Complexity with defensibility
- Custom development with IP
Buyers look for clarity:
- What IP exists?
- Who owns it?
- Is it documented?
- Is it protected?
- Is it transferable?
- Is it core to revenue?
Unprotected IP—no matter how clever—is fragile. If there are no assignments, registrations, or clear ownership, buyers will either discount value or demand remediation before closing.
This is especially common in software, SaaS, and tech-enabled services where early development was informal. What feels “obviously ours” to a founder can look dangerously ambiguous to a buyer.
Customer Relationships: Predictability Over Passion
Founders often describe customer relationships with pride—and emotion. Buyers strip the emotion out immediately.
They ask:
- Are relationships contractual or personal?
- How long do customers stay?
- What happens if pricing changes?
- How concentrated is revenue?
- Who owns the relationship—the company or the founder?
Customer relationships become valuable intangible assets when they are:
- Contractual
- Long-term
- Diversified
- Predictable
- Managed by teams, not individuals
If customers are loyal to you, not the company, the relationship is not transferable. Buyers price that risk quickly—and aggressively.
On the Legacy Advisors Podcast, we often say that buyers don’t buy relationships; they buy systems that produce relationships.
Data as an Asset: Only If It’s Usable and Exclusive
Data is frequently cited as a major intangible asset. Sometimes it is. Often it isn’t.
Buyers evaluate data by asking:
- Is it proprietary?
- Is it clean?
- Is it structured?
- Is it current?
- Is it legally usable?
- Does it inform decisions?
- Does it drive revenue or efficiency?
Large volumes of data with unclear ownership, poor hygiene, or limited application don’t add value. They add complexity.
Data becomes valuable when it:
- Improves outcomes
- Reduces cost
- Enhances targeting
- Strengthens retention
- Creates switching costs
If the data doesn’t materially change decisions or performance, buyers will not assign meaningful value to it—no matter how large it is.
Processes and Know-How: Value Depends on Documentation
Operational know-how can be a powerful intangible asset—if it’s institutionalized.
Buyers want to know:
- Are processes documented?
- Are they repeatable?
- Are they taught consistently?
- Are they embedded in systems?
- Do they scale beyond individuals?
If your “secret sauce” lives in people’s heads, buyers see risk, not value. If it lives in playbooks, systems, and training, buyers see leverage.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that undocumented know-how is not an asset—it’s a dependency.
Culture: Valuable, But Rarely Priced Directly
Culture matters. Buyers talk about it constantly. But culture rarely receives a standalone line item in valuation.
Why? Because culture is fragile during transitions.
Buyers care about culture insofar as it affects:
- Retention
- Execution
- Customer experience
- Integration risk
Strong culture can support valuation by reducing perceived risk. Weak or founder-centric culture can do the opposite.
Culture doesn’t usually add value directly—but it can absolutely destroy value if mishandled.
Contracts, Partnerships, and Relationships
Contracts and partnerships are among the most straightforward intangible assets—when they’re structured correctly.
Buyers evaluate:
- Contract length
- Termination rights
- Change-of-control clauses
- Exclusivity
- Assignment rights
- Renewal history
A partnership that “feels strong” but lacks formal structure is fragile. A contract that survives ownership transition cleanly is an asset.
Founders often assume partners will “stick around.” Buyers don’t assume. They verify.
How Buyers Actually Value Intangibles
Here’s the critical point: buyers rarely assign a separate price tag to intangible assets. Instead, they reflect intangible value through:
- Higher multiples
- Cleaner deal structures
- Fewer contingencies
- More cash at close
- Less reliance on earnouts
Intangibles influence valuation indirectly by reducing risk and increasing confidence.
If buyers believe your intangible assets are real, durable, and transferable, they’re willing to pay more for the same EBITDA. If they’re uncertain, they’ll protect themselves through price or structure.
The Most Common Founder Mistakes
I see the same mistakes repeatedly:
- Assuming intangibles are obvious
Buyers don’t see what you see. You have to show them. - Overestimating emotional value
What matters to you emotionally doesn’t automatically matter financially. - Under-documenting critical assets
If it’s not documented, it’s discounted. - Ignoring transferability
If it depends on you, it’s risky. - Treating intangibles as a negotiation tactic
Value is established before negotiation, not during.
On the Legacy Advisors Podcast, Ed and I often remind founders that intangible value must be operationalized before it’s monetized.
Making Intangible Value Visible Before You Sell
The best time to address intangible valuation is before you go to market.
Founders should:
- Document processes
- Formalize IP ownership
- Reduce founder dependency
- Strengthen contracts
- Clarify data usage rights
- Build leadership depth
- Create evidence of brand impact
These steps don’t just help valuation—they help the business operate better today.
At Legacy Advisors, this is where much of the real work happens. Not in pitching buyers—but in preparing companies so value is obvious when buyers show up.
Intangibles and Deal Structure
When intangible value is strong but uncertain, buyers often use structure to bridge the gap:
- Earnouts
- Holdbacks
- Performance milestones
- Retention agreements
These aren’t punishments. They’re risk-sharing mechanisms.
Founders who want cleaner deals must make intangible value feel inevitable, not hypothetical.
The Long-Term View
Intangible assets are often what make a business special. They’re also what make it fragile.
The founders who achieve the best outcomes don’t argue that intangibles matter—they build businesses where intangibles are embedded, documented, and transferable.
When that happens, valuation conversations become easier. Buyers stop asking, “Will this hold together?” and start asking, “How fast can this grow?”
Final Thought: Intangibles Don’t Create Value—They Protect It
Here’s the counterintuitive truth:
Intangible assets rarely create value on their own.
They protect, stabilize, and amplify the value created elsewhere.
They reduce risk.
They increase confidence.
They justify better outcomes.
And in M&A, reduced risk is often the most valuable asset of all.
Find the Right Partner to Help Sell Your Business
Valuing intangible assets isn’t about convincing buyers they matter—it’s about proving they endure. If you want help identifying, strengthening, and positioning the intangible drivers that support valuation and deal certainty, Legacy Advisors helps founders prepare for market with clarity, discipline, and experience.
Frequently Asked Questions About Valuing Intangible Assets
1. Why do buyers seem skeptical about intangible assets I believe are valuable?
Buyers aren’t dismissing intangible assets—they’re evaluating risk. Intangibles only have value if they are durable, transferable, and defensible after the founder exits. Brand, relationships, or know-how that depend heavily on a single person or lack documentation create uncertainty. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that buyers don’t pay for sentiment; they pay for repeatability. On the Legacy Advisors Podcast, Ed and I often say that intangible value must survive ownership transition. If a buyer can’t clearly see how an asset continues generating cash without you, they will discount it—regardless of how important it feels internally.
2. Can intangible assets increase my valuation even if EBITDA stays the same?
Yes—and this is one of the most misunderstood aspects of valuation. Strong intangible assets rarely increase EBITDA directly, but they can significantly increase the multiple applied to it. When buyers see durable brand strength, protected IP, predictable customer relationships, and documented processes, perceived risk drops. Lower risk supports higher multiples and cleaner deal structures. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that valuation expands when risk contracts. On the Legacy Advisors Podcast, we’ve seen many cases where improved intangibles led to better outcomes without any short-term financial change.
3. How do I prove the value of my brand to a buyer?
Buyers don’t value brand because it’s recognizable—they value it because it drives measurable outcomes. To demonstrate brand value, show evidence of pricing power, customer loyalty, inbound demand, lower acquisition costs, and reduced churn. Testimonials and awareness alone aren’t enough. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I stress that brand value must be evidenced, not asserted. On the Legacy Advisors Podcast, Ed and I often remind founders that brand becomes valuable when it influences behavior in predictable ways. If you can tie brand strength to financial or operational performance, buyers listen.
4. What makes customer relationships a risky intangible asset?
Customer relationships become risky when they are personal rather than institutional. If customers are loyal primarily to the founder or a single executive, buyers worry about churn after the transition. Buyers prefer relationships governed by contracts, managed by teams, and supported by systems. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that buyers don’t buy relationships—they buy systems that produce them. On the Legacy Advisors Podcast, we consistently see customer concentration and founder-centric relationships drive valuation discounts or earnout structures. Transferability is what converts relationships into value.
5. How far in advance should I start preparing intangible assets for valuation?
Ideally, years—not months—before a sale. Documenting processes, formalizing IP ownership, reducing founder dependency, strengthening contracts, and clarifying data rights take time. These efforts improve day-to-day operations long before they affect valuation. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that preparation beats persuasion. On the Legacy Advisors Podcast, Ed and I often say that intangible value must be operationalized before it can be monetized. If you want guidance prioritizing and strengthening these assets, Legacy Advisors can help you prepare long before buyers arrive.