In this post you’ll learn the answers for the questions: what does intrinsic value mean? and how is raised in business?
One of the biggest factors that can dictate the level of growth or the speed of growth of a business, is the amount of capital it has to invest on areas such as research and development and marketing. Usually the biggest the budget the greater the odds that not only will the business survive on this highly competitive arena that the business world is, but also that it will thrive. One way businesses get money to invest is through investors, and the one thing investors usually look for is a business with high intrinsic value.
What does intrinsic value mean?
The intrinsic value of a business is in a few words the worth of a business taking in consideration tangible factors in combination to intangible factors that matter for that business. Both factors depend on from area to area of business, which means that the tangibles/intangibles you use to valuate one business, might not be the best to another. The tangible aspects of a business are the factors of the business you can easily measure such as: inventory, cash, revenue, # of sales, # of employees, etc. The intangibles are usually the aspects of the business that are somehow difficult to measure/see, such as brand recognition, popularity, patents copyrights, etc. The intangibles add value to the business but how is that so, is somewhat subjective. Different people can easily come with different pictures of the true impact of a certain intangible asset in a particular business. When put together the tangibles and the intangibles paint a picture of the health state of the company.
The intrinsic value of a business is raised by improving the tangible factors that matter for that particular business as well as the intangibles. This is done so in many different ways, below are a few of them:
- New discoveries from R &D
(bringing new patents)
- Acquisition of new technical insights
- purchase of other businesses
It is all about knowledge and experience;)
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