Financial Valuation of a Business Model as an Intangible Asset

Financial Valuation of a Business Model as an Intangible Asset

Payam Hanafizadeh (Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran), Seyed Saeed Hosseinioun (University of Science and Culture, Tehran, Iran) and Hamid Reza Khedmatgozar (Iranian Research Institute for Information Science and Technology (IRANDOC), Tehran, Iran)
Copyright: © 2015 |Pages: 15
DOI: 10.4018/IJEBR.2015100102
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Abstract

Knowledge-based economies rely greatly on intangible assets. Based on its features, a business model can be an intangible asset; by posing barriers to imitation, it can create competitive advantage and increase a company's value. Hence, a business model's financial valuation is of great importance. Accordingly, the main objective of the present study is to design a process to valuate business models, using income approach and the concept of competitive advantage. An active corporation engaged in daily deal business was chosen as a case study. Its business model is identified and then valued using the proposed process. The results revealed that the process has reasonable accuracy. Financial valuation of business models is useful for bridging the gap between book value and market value, increasing a firm's ability to raise capital from venture capitalists, improving bargaining power in M&A contracts and providing support in the case of litigation.
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2. Review Of The Literature

The relevant literature includes three areas: Identification of the business model as an intangible asset, the significance and purposes of financial valuation of the business model, and evaluation and analysis of the financial effect of the business model. The relevant literature from each area will be separately reviewed in this section.

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