Measuring the Strategic Readiness of Intangible Assets
Intangible assets are resources owned by a business that do not physically exist. These assets are valuable and generate revenue for the business. They are also known as intellectual properties; common types of intangible asset include research and development, goodwill, patents, trademark and copyrights. Strategic readiness is the measure of the business's ability to utilize its resources systematically to meet goals. This measure is expressed against a set standard or scale or as a percentage. Strategic readiness of intangible assets is the measure of how effectively an organization utilizes its intangible assets to meet its performance objectives.
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Instructions
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1
Analyze the business records to identify the intangible assets and classify them according to their natures. Each intangible asset has a pre-determined life span. For example, a patent has a lifespan of seven years; this establishes the period during which the asset has been in use and the time remaining before its lifespan is exhausted.
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2
Calculate the value of the asset using the straight-line method. Each intangible asset has a monetary value attached to it, based on prevailing market prices and the asset's lifespan. For example, assume an asset's estimated value is $400,000 and its estimated lifespan is 16 years. Divide $400,000 by 16 to find a recurring expense of $25,000 per year of the asset's lifespan.
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3
Specify the appropriate type of measuring scale to measure the readiness of the intangible assets. Use a scale of 1 to 6 -- with 1 corresponding to "least effective" and 6 to "most effective" -- to measure the effectiveness of an asset's utilization. Determine the value that the intangible asset has added to the business by subtracting the revenue of the business before acquiring it from the revenue after acquiring it. The difference is the revenue attributed to intangible assets.
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4
Calculate the percentage of strategic readiness. Divide the revenue attributed to intangible assets by the yearly cost of the intangible assets. Convert the decimal figure to a percentage by multiplying by 100.
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5
Compare the performance percentage to the performance of the intangible assets. When the percentage is high, it implies that the intangible asset has been effectively aligned, and a score of 5 can be assigned to it from the scale. When the score is low, it implies that the intangible asset is not being utilized effectively, and a low score of 2 may be assigned to it.
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6
Identify the area within the business operation that requires adjustment to enhance the returns from the intangible asset. Reorganize the technology used, marketing or management strategies to bring about the desired changes.
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Tips & Warnings
Always refer to the most recent financial statements for the values of intangible assets.
Do not place much emphasis on the measure of an intangible asset that is nearing the end of its lifespan. The data will not be appropriate for future planning.
