Companies tend to focus on the tangible assets that add value to their business, such as inventory and equipment. However, the real driving force behind business value is a company’s intangible assets—its intellectual property and employees, among other things.
As a business owner, it is critical that you identify, protect, and defend the intangible assets that add tremendous value to your business.
Let’s take a closer look at two important intangible assets: intellectual property and human capital (employees).
Intellectual Property (IP)
Chinese start-up DeepSeek had markets retracting on Monday–Nvidia stock in particular–as investors feared this new cost-efficient, artificial intelligence model would usurp our U.S.‑based models. Now the latest round of news via Britain’s Financial Times reveals that OpenAI claims to have evidence that DeepSeek used OpenAI’s proprietary models to train its new AI model. If this proves to be true, it is yet another example of theft of intellectual property.
This type of theft doesn’t happen only to large companies; small companies are targeted as well.
Unfortunately, a growing number of companies choose to steal assets rather than do the work necessary to create their own intellectual property. In the old days, we called it corporate espionage.
Now we call it what it truly is, intellectual property theft–the unauthorized use, exploitation, or outright theft of creative works, proprietary information, trade secrets, or ideas.
How does it happen? These companies often practice cyber espionage, using hackers to gain access to intellectual property through corporate networks. They may also resort to physical theft in which perpetrators gain confidential information directly from a business or use someone to gain insider information and then commit piracy (the unauthorized use of copyrighted material).
The impact of IP theft is enormous. It can cause serious financial damage to businesses by eroding their competitive advantage.
Protecting Intellectual Property
Companies invest substantial time and resources in the development of their intellectual property. Since these investments have a significant impact on business value, it is critical that business owners identify, protect, and defend their business’s IP.
Here are a few strategies that companies use:
· Legal protection: The business owner documents and registers trademarks and copyrights for creative work, files patents for proprietary technology and innovations, and documents all research and development.
· Contractual protection: The business owner requires non-disclosure agreements (NDAs) with employees, partners, and clients, which also provides legal protection. Requiring confidentiality agreements for sensitive information is also a good strategy. It is vitally important for business owners to enforce NDAs, confidentiality agreements, and noncompete agreements.
· Physical security: Restricting access to trade-secret information is critical. Business owners install robust software programs that serve as a digital security guard, monitoring the transfer of all sensitive data.
In today’s world, it pays to be proactive. Identify and protect your IP. And if your company does fall victim to theft or a data breach, rigorously pursue all legal remedies, such as cease-and-desist orders. Developing IP is challenging work and requires significant investment, so if you are being threatened, do everything you can to protect this valuable asset of your business.
Human Capital
Successful businesses also recognize the value of another essential asset–their employees. Building, training, and retaining knowledgeable, highly skilled employees at all levels requires vision, strategic investment, and patience; however, it contributes significantly to the value of your business.
Check out The Human Capital Advantage: Why Your Employees Are Your Business’s Most Valuable Asset to learn more.
Understanding the value of your business requires a thorough analysis of both the tangible and intangible assets that drive future cash flow. Your business valuation becomes the cornerstone upon which you make critical decisions as you exit your business. At Legacy Partners, we are here to help you navigate the process to identify, protect, and defend your valuable, intangible assets.