Today I read a discussion about business valuation on Facebook.
Someone put up a question:
What multiple is typically used in the fabric printing industry for a business valuation?
Under this question, there were many comments and replies. Among the top comments, two replies attracted my attention.
One replied, 99% of businesses in the industry are only worth the liquidation value of their equipment.
And the other asked back, is the client list worth anything?
These two answers are very representative because they try to analyze the business value from two aspects, one is tangible assets and the other is intangible assets.
What’s the Difference Between Tangible assets and Intangible assets?
Tangible assets, namely, refer to something that can be seen or touched, and they are the main type of assets for manufacturing companies since they use these assets to conduct production activities and offer services.
While intangible assets are something that is non-physical or non-monetary, they have monetary value, represent potential revenue, and play an important part in your business value.
The property, equipment, and vehicles are your fixed assets, and they are used to produce something to generate revenue.The value of the property will be decided by the macroeconomic environment, while for the equipment and vehicles, the depreciation starts the moment you purchase them.
The intangible assets, like your brand and your customer data, will be your long-term assets. Why these intangible assets are important? A strong brand can help you survive in a changeable market environment. And the customers on your list are those who may boost your sales for years to come.
Tangible Assets VS Intangible Assets in Fabric Printing Industry
Tangible assets in the fabric printing industry include physical resources that a company owns and operates. These assets have a physical form and can be seen and touched. Examples of tangible assets in the fabric printing industry include:
Machinery: Printing presses, screen printing equipment, and other machinery used in the production process are all examples of tangible assets.
Equipment: This can include any tools, fixtures, or devices used in the printing process, such as screen printing frames, squeegees, and ink wells.
Buildings: Any structures used for production or storage, such as a factory, warehouse, or office building, are considered tangible assets.
Tangible assets are typically easier to value than intangible assets, as they can be appraised based on their purchase price or replacement cost. They also typically have a longer lifespan and can be used to generate income over a long period of time.
Intangible assets, on the other hand, are non-physical resources that are essential to the success of a fabric printing company. These assets do not have a physical form, but they can still provide value to a company. Examples of intangible assets in the fabric printing industry include:
Intellectual Property: This can include patents, copyrights, and trademarks that a company uses to protect its designs and products.
Customer Relationships: The value of a company's existing customer relationships can be considered an intangible asset. This includes the reputation and brand recognition a company has built over time.
Goodwill: Goodwill refers to the intangible value of a company that is not reflected in its financial statements. It can include factors such as a strong brand, a positive reputation, and a loyal customer base.
Intangible assets can be difficult to value, as they are often subjective and difficult to measure. However, they can provide a significant source of value and competitive advantage to a company.
In conclusion, both tangible and intangible assets play an important role in the fabric printing industry. Understanding the differences between these assets can help companies make informed decisions about how to allocate resources, manage risk, and maximize the value of their assets.
