Brand equity is the asset most frequently underestimated in generational transition processes. Intangible assets like brand, reputation and customer loyalty can represent up to 80% of a company’s economic value (Canella Camaiora / business valuation literature). Yet in the succession plans of Italian SMEs, the brand rarely appears as an asset to be protected and enhanced. The result: companies that are worth less than they could be at the time of transfer, or that lose value in the 12 to 24 months following the transition, when the brand equity built by the founder dissipates without governance.
When the brand depends exclusively on the founder as an individual, this risk increases even further. The key person discount applied to company valuation, the reduction an acquirer applies when the organization depends excessively on a single individual, can amount to between 10% and 25% of the final price. A cost that could have been avoided by acting in advance.
Structuring a plan for the generational continuity of the brand before the transition is the operational difference between transferring value and dispersing value: it is not a communication activity, it is an act of asset governance.
Brand equity and generational transition: the connection no one makes
In business valuation processes, both for a sale to third parties and for the liquidation of shares among heirs, brand value directly affects the multiple that the buyer or appraiser is willing to recognize. Elements such as brand reputation, customer loyalty, and low dependence on the entrepreneur can significantly increase perceived value and the multiple applied (b2beffect.it, 2025).
This is where the critical point lies: in many Italian family-owned SMEs, brand equity is built around the founder as a person, not around the company’s value system. This means that when the founder leaves, due to generational transition, sale, or retirement, a significant share of the brand equity leaves with them. A rational buyer discounts this risk in the price. An heir who does not govern the brand transition experiences it in revenue in the months following succession.
The problem of biographical goodwill
In business valuation, the component of value that cannot be explained by tangible assets is called goodwill. Goodwill includes brand equity, know how, established commercial relationships and reputation. In family businesses, part of the goodwill is institutional, belonging to the company as a system, and part is biographical, belonging to the founder as an individual and not transferable without explicit governance work.
A buyer in an M&A process distinguishes between the two components. An appraiser handling the liquidation of shares among heirs rarely does so explicitly, but the market does so anyway in the months following the transition, when biographical brand equity dissipates and revenue reveals the difference.
How to measure brand equity before a generational transition
There are three internationally recognized methods for valuing a brand, each with specific areas of application:
| Method | Logic | When it is used | Limitation in the succession context |
|---|---|---|---|
| Cost method | Sum of the costs incurred to create and maintain the brand | Young brands, internal accounting purposes | Systematically undervalues established brands, the ones most relevant in succession |
| Market method | Comparison with comparable transactions (sales, licensing agreements) | Availability of reliable comparative data | Difficult for SMEs with niche brands, as comparables do not exist |
| Income method | Present value of future income flows attributable to the brand (royalty rate) | M&A transactions, financing, transfers of ownership | Requires an estimate of future flows that depends on how much brand equity is institutional vs. biographical |
The income method is the one most commonly used in significant transactions, and the one that makes the problem of biographical brand equity most evident. If a share of the future cash flows attributable to the brand depends on the presence of the founder, that share is discounted in the discount rate or directly reduced in the projections. A brand with its own governance, codified values, and a documented visual identity holds up better in valuation than one that depends on an individual.
What happens to brand equity in the 24 months following the transition: the recurring pattern
The AUB Observatory (2025) documents that well-managed generational transitions produce an average +4.2% ROA and +8.8% revenue in the following three years. The implicit data, the part that does not emerge from aggregate averages, is that poorly managed transitions produce the opposite effect. A predictable mechanism:
- Months 1 to 6 post-transition: long-standing customers who used to buy from the person slow down or pause commercial relationships while waiting to understand who the new points of contact are. Suppliers renegotiate terms. The market watches.
- Months 6 to 18: communication becomes fragmented, different messages are given to different customers, visual identity is used inconsistently, customer promises vary depending on the point of contact. Brand equity erodes silently, without any financial indicator yet clearly showing it.
- Months 18 to 36: revenue reveals the difference. Margins shrink because the premium positioning that justified the price has weakened. Recovering from this position requires twice the time and budget compared with preventing it through brand governance built before the transition.
Case: Prada Versace and the measurable value of a brand
The case of Prada’s acquisition of Versace, with an estimated valuation of around €1.5 billion (GBB Studio, 2025), is instructive. Not because of its scale, but because of the principle. Versace is worth €1.5 billion not because it has plants or machinery worth that amount: it is worth it because it has a brand with measurable reputation, a customer base with documented loyalty, an established international distribution network and a recognizable brand identity. All intangible assets. All components of brand equity.
For an Italian family owned SME with €5 or €20 million in revenue, the principle is identical, only the scale is different. If 30 to 50% of revenue depends on the founder’s personal relationships that have not been transferred to the institution, that share does not have the same value in a company valuation as the remaining revenue. A buyer discounts it. An heir progressively loses it. The difference between the two positions is brand governance, built before, not during or after, the generational transition.
A case from the Bliss portfolio: Risivi & Co. and brand equity as verifiable data
In discussions about brand equity in family businesses, the most common risk is treating it as a subjective estimate, “the brand is worth a lot”, without anchoring it to concrete data. The case of Risivi & Co., a family run Roman luxury artisan jewellery company, offers a different point of reference: the growth in brand value is documented in the financial statements filed with the Chamber of Commerce, not in a sentiment report. When Bliss began the collaboration, the brand had identity, product quality and cultural recognizability, but lacked a governance system capable of transforming that perceived capital into measurable demand. The intervention involved complete brand governance for twenty four months: strategy, positioning, content, paid campaigns, PR and connections with artists and relevant figures from the Italian urban scene.
The data point that qualifies Risivi & Co.’s brand equity as real value, not perceived value, is the change in revenue: from €206,000 to €556,000 in twelve months, with parallel growth online and in store. This change cannot be explained solely by advertising investment: it is the measure of what happens when a brand stops being biographical, tied to the person, intuition, the moment, and becomes a governed, coherent and scalable system. In the context of a generational transition, this distinction is what separates a transferable brand from one that has value only as long as the person who built it is present. The full case study is available in the Bliss Agency portfolio section: Risivi & Co., Case Study.
Brand equity as an active lever in business valuation: what to do before succession
Protecting and enhancing brand equity before a generational transition does not require extraordinary operations. It requires consistency in three areas:
- Codification of brand identity: written values, formalized customer promise, defined tone of voice, documented visual identity with usage rules. The objective is to make the brand understandable and applicable without the founder, by an heir, by a manager, by a buyer who needs to integrate the brand into a larger group.
- Transfer of key relationships from the individual to the institution: customers who buy from the founder must gradually be introduced to new points of contact while the founder is still present. It is a process that requires 12 to 24 months and cannot be arbitrarily accelerated without reputational costs.
- Documentation of the track record: case studies, measurable results, structured references. Brand equity is a concept; a documented track record is its verifiable proof, the kind that stands up in due diligence or in a brand valuation report.
For the complete framework on brand governance in generational transition, including the 4 phase Bliss framework and Italian market data, read: Generational Transition: Brand Identity and Continuity in Family Businesses.
New Connections (FAQ)
What is brand equity and why does it matter in generational transition?
Brand equity is the economic value that a brand adds to a company compared with a product or service without a recognizable brand. In generational transition, it matters because it is often the component of value most exposed to risk: if brand equity is tied to the founder as a person, it partially leaves the company when they leave. A brand with its own governance, codified values, documented identity and relationships transferred to the institution maintains its value regardless of leadership changes.
How is the brand of a family-owned SME valued?
The method most commonly used in transfer and M&A transactions is the income method: it calculates the present value of future income flows attributable to the brand, typically through the capitalization of royalties generated or attributable to it. The method requires an estimate of how much of the future flows depends on the brand as an institution vs. the founder as a person: the higher the institutional component, the higher the value recognized by the appraiser.
How much does the brand affect company valuation?
Intangible assets, brand, reputation, know-how, customer loyalty, can represent up to 80% of a company’s economic value (business valuation literature). In practice, among Italian SMEs the share varies, but the direction is constant: companies with low dependence on the entrepreneur and a documented brand identity systematically achieve higher multiples than companies with the same revenue but an unmanaged brand.
Can a brand be lost during a generational transition?
Yes, not suddenly, but progressively. The mechanism is this: customers who used to buy from the person slow down or end the relationship; communication becomes fragmented without brand governance; the premium positioning that justified the price weakens. Revenue signals the loss with a delay of 12 to 24 months from the moment brand equity began to erode. Recovering it requires twice the time and budget compared with preserving it through governance built before the transition.
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