Branding is critical to the success of a business. It is the gut feeling, the perceived emotional image that people have about what you do and who you are. Without a consistent, diligent brand development and management strategy, the ability to forge that initial connection with would-be clients is not fully realized. This is especially important because it is this first engagement with your brand that marks the first step in the sales cycle, and plays a significant role in whether your company is viewed as a potential business partner.
The Challenge: Attaining Buy-In for Rebranding
Often, even when there is widespread internal agreement that a rebranding would be of value, there can be reluctance about incurring the cost within a budget year. This basic misperception – the view of rebranding as a cost instead of an investment – can play a definitive role in the associated decision-making of a reluctant board member or C-suite executive.
The Good News: Rebranding Is an Investment
Fortunately, this is a concern with an established solution. From an accounting standpoint, when handled appropriately, rebranding is treated as an investment. While the precise strategies and associated reporting will vary based on a variety of factors (and the consultation of a qualified financial professional is absolutely required), in general, rebranding expenses are recorded as a capital expense (CapEx).
Simply put, CapEx is any expense that a company lists on its balance sheet as an investment. The other common category of expense, operational expense (OpEx), is instead accounted for on the income statement, and is typically watched over vigilantly by a company’s management, as it is deducted directly out of bottom-line profitability.
Making It Happen: Consult With Your CFO, CPA, or Attorney
It’s no secret that accounting and tax treatment surrounding different forms of investment are complex and will always be, to a certain degree, specific based on your company’s individual situation. Finding out how your rebranding investment should be pursued depends on a wide variety of factors that require a detailed knowledge of not only the applicable tax and financial rules, but of your company’s finances as well.
Much focus is typically placed on demonstrating the operational benefits of a rebrand, and rightfully so. Presenting an attendant accounting benefit can be helpful as teams evaluate its financial impacts. Taking the time to sit down with your CFO, CPA, or attorney is a worthwhile exercise and a great first step toward getting on the same page about how best to proceed.
Introducing Rebranding as an Asset Gained, Not a Cost Lost
SCORR executed a rebranding for a client in 2016. The results were immediate and quantifiable.
The client saw significant improvements of the potential-customer behaviors that lead directly to customer acquisition and business growth. Rebranding leads to increased awareness, digital traffic, and engagement. Which result in more leads, conversions, and customers. And it’s these initial new-client wins that so often build the sort of buzz, momentum, and market reputation that form the foundation of sustainable, ongoing growth and operational success. This is exactly the virtuous cycle SCORR delivers.
In 2017, immediately following the client’s rebrand, its revenues increased 56%. This burst of post-rebrand new client acquisition began when the company had a valuation under $70 million. It has gone on to a valuation over 10x higher, above $700 million.
The impactful gains that can be delivered via rebranding aren’t attained at the cost of taking a short-term loss on the income statement, but from the addition of a long-term asset to the balance sheet.
By creating an asset through investment in your company’s marketplace perception and industry positioning, find out how SCORR can become your creative and competitive advantage.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Because each company’s legal, tax, and financial situation is different, specific advice should be tailored to its particular circumstances. You are advised to consult with your own CFO, CPA, attorney, and/or other advisor regarding your specific situation.