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There is no single brand value formula. There are three accepted ways to estimate it, and one of them (relief from royalty) is used far more than the others. This guide explains all three, shows the arithmetic, and separates brand value (money) from brand equity (what customers think).
By Brand AI · Updated
Brand value is estimated with one of three approaches. The cost approach adds up what it cost, or would cost, to build the brand. The market approach looks at what similar brands sold or were licensed for. The income approach values the extra profit the brand earns; its most common form, relief from royalty, asks how much you would pay to license your own brand if you didn't own it, then discounts those payments to today.
| Brand value | Brand equity | |
|---|---|---|
| What it is | What the brand is worth in money | How strongly customers know, like and prefer the brand |
| Measured with | Cost, market or income methods (below) | Awareness, perception, preference, loyalty, price premium |
| Used for | Sales, investment, licensing, accounts | Marketing decisions and tracking brand health |
| Result | A money figure | Scores and trends |
The two are linked: strong equity is what lets a brand charge more or sell more, which is what the income approach measures.
Brand value = what it cost to build the brand (historical cost), or what it would cost to build an equally strong brand today (replacement cost): design and identity work, launch campaigns, advertising and content spend that built awareness.
It is simple and uses figures you already have. Its weakness is that money spent is not the same as value created: a brand that spent a lot and failed scores high, and a brand that grew by word of mouth scores low. Use it as a floor, or for young brands with no profit history.
Brand value = what comparable brands sold or were licensed for, adjusted for size and strength. It reflects what buyers actually pay, which makes it persuasive.
The catch is data. Brand-only sales are rare and their prices are often private, so for most small and medium businesses there is nothing truly comparable. It works best in sectors where brands are bought and licensed often.
Relief from royalty imagines that you do not own your brand and must license it from someone else. The royalty you no longer have to pay is the brand's contribution to profit. The formula for each year:
Brand earnings in year t = Revenuet × royalty rate × (1 − tax rate)
Brand value = sum over the years of Brand earningst ÷ (1 + discount rate)t, plus a value for the years after the forecast if you expect the brand to keep earning.
Three inputs drive the answer, so choose them carefully:
A second income method, the price premium method, values the extra price customers pay for your brand over an unbranded equivalent: premium per unit × units sold, discounted the same way. It works when there is a clear unbranded comparison.
Illustrative inputs only, chosen to show the arithmetic: revenue of 200,000 this year, growing 5% a year; royalty rate 3%; tax 30%; discount rate 15%; 5 years. Currency does not matter.
| Year | Revenue | Royalty saved (3%) | After tax (70%) | Present value (÷ 1.15t) |
|---|---|---|---|---|
| 1 | 200,000 | 6,000 | 4,200 | 3,652 |
| 2 | 210,000 | 6,300 | 4,410 | 3,335 |
| 3 | 220,500 | 6,615 | 4,630 | 3,045 |
| 4 | 231,525 | 6,946 | 4,862 | 2,780 |
| 5 | 243,101 | 7,293 | 5,105 | 2,538 |
| Estimated brand value over 5 years | 15,349 | |||
Change the royalty rate from 3% to 5% and the value rises by two thirds, which is why the royalty rate deserves the most care. A full valuation would also add the value of the years after year 5.
Relief-from-royalty estimate. Change any number; the table updates. Runs in your browser.
For a quicker estimate that combines financial value with market strength, use the Brand AI brand equity calculator.
Brand equity is measured with scores rather than one formula. The usual dimensions:
A brand strength index combines several of these into one score. Brand 360 scores a brand across 19 dimensions and lists what to fix, which makes it a practical way to track equity month by month.
Brand value is calculated with the cost approach (what it cost to build the brand), the market approach (what similar brands sold or were licensed for) or the income approach. The most common income method is relief from royalty: forecast revenue, multiply by a royalty rate, subtract tax, and discount each year's figure to today.
Brand equity has no single formula because it is measured from the customer side: awareness, perception, preference, loyalty and price premium. A common money proxy is the price premium method: the extra price per unit customers pay for the brand × units sold, discounted over time. Brand strength indexes combine several scores into one.
Brand value is what the brand is worth in money, estimated with cost, market or income methods. Brand equity is how strongly customers know, like and prefer the brand, measured with scores such as awareness and loyalty. Strong equity is what produces brand value.
Relief from royalty values a brand as the royalties the owner saves by not having to license it: forecast revenue × a royalty rate, minus tax, discounted to today for each year of the forecast, plus a value for later years. It is the most widely used brand valuation method.
Yes. The calculator on this page estimates value with relief from royalty using your own inputs, and the Brand AI brand equity calculator gives a quick estimate of financial value and market strength. Both are estimates; a formal valuation for a sale or accounts needs a qualified valuer.
Brand value follows consistency and trust. Build a Brand Kit and track brand health with Brand 360.
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