Custom software is high-value intellectual property - which can dramatically increase your business valuation

What is your business worth? Great leaders are always on the lookout for innovative ways to increase the value of their organization. While there are many avenues for accomplishing this, the creation or acquisition of intellectual property is one potent strategy for a company to increase its net worth.

Intellectual property (IP), broadly speaking, is essentially any product of the human intellect. IP can be formally registered as a legally protected asset, in which case it can’t be used or reproduced by other parties without explicit consent. The most common examples of legally protected IP are patents, copyrights, trademarks, and trade secrets.

Should you patent your custom software?

Of the various types of formally protected IP, patents tend to have the greatest impact on market value and are typically the most applicable for custom software protection. Many organizations, both large and small, now acknowledge the value of creating and protecting intellectual property. According to the World Intellectual Property Organization, nearly 15 million patents were in force worldwide in 2019.

When you build custom software, your new intellectual property will generate value for your business regardless of whether or not you choose to file for a patent. However, if you expect that your new software will provide a strong advantage in the marketplace, and it seems plausible that your competitors may seek to replicate it, then applying for a patent is likely a good investment.

How does IP provide a competitive advantage?

Intellectual assets like custom software usually provide a competitive advantage in the marketplace by empowering your organization to operate in innovative ways competitors can’t. For example, if your IP allows you to operate at a faster speed or lower cost than others in your industry, you have a significant advantage.

When you have a unique and valuable product, service, or process that your customers can’t get anywhere else, there will most likely be an opportunity to raise your prices accordingly. You may also be able to increase your market share by appealing to new customer segments that were previously out of reach. Differentiating your organization with custom software allows you to gain brand recognition and establish a reputation as an innovative business.

How else can IP be leveraged for financial gain?

Patented IP can also be strategically leveraged to create new mechanisms for financial gain. If you choose to license the use of your custom software to other businesses, the royalties from patent licensing can become an additional revenue stream for your organization - cash flow going straight to your bottom line. Strategic use of intellectual property can also lead to opportunities for joint venture partnerships with other companies.

What’s more, intellectual property actually has innate value simply by existing - even if it is not in use in the real world. The possession of intellectual property can make your business more appealing to investors by signaling higher future earnings potential. And for publicly traded companies, owning IP can increase stock valuation.

Join an elite class of intellectual property owners

Strategically investing in intellectual property like custom software can dramatically increase the value of a business. For example, when Amazon patented one-click order processing in 1999, not only did their customers enjoy a more delightful ordering experience, they also legally blocked competitors from replicating the technology - providing them with an enormous competitive advantage. By the time the patent expired in 2017, their dominant status in the ecommerce market was resolute.

The good news is, you don’t need the resources of Amazon to join the elite class of businesses that own high-value IP. Here at Basecode we can work within your budget to help you create bespoke software that provides your business with just the right functionality to secure your own competitive advantage in the marketplace. Find out more.