COAST APPROACH VALUATION METHOD

COST APPROACH VALUATION METHOD

Cristian Jair Arango PeñaGroup: 212032_31

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LINCENSEE

LINCENSOR

He has to estimate the costs of conducting an in-house R&D programme either to develop the technology or to design around it, or to acquire a replacement technology with similar attributes.

For this approach it is required to calculate all the cost involved in the development and protection of the technology to date

Factors to take into account

The opportunity cost of being earlier to the market

The elimination of the risk of failure if the company were to develop the IP itself

This can be a point of negotiation, because putting a value on the elimination of the risk of failure is more difficult

The value of the opportunity gained can be calculated by estimating the sales that could be achieved in the time it would take to develop the technology itself

The stumbling block with this method

lies in that costs and value are rarely related and that licensees are most interested in the income they can obtain from the technology acquired. costs can be a good basis for the licensor to negotiate licence fees or lump sum payments, as a rationale for recouping investment costs.

Example

- Software of call center - Websites - Patents

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