Making your IP portfolio work for you

In business and accounting, an asset is defined as anything owned, whether in possession or by right to take possession, by a person or a group acting together, e.g. a company, the value of which can be expressed in monetary terms.

According to Robert Kiyosaki, the key to achieving financial security is in understanding the difference between an asset and a liability and learning to leverage that difference. “An asset puts money in your pocket and a liability takes money from your pocket,” he says. “The rich understand the difference and buy assets, not liabilities.” However, while Kiyosaki talks about how to make money work for you by investing in real estate, which is capital intensive, he does not talk about how to make your Intellectual assets work for you. Assets include intangible assets, that is, those assets which, though not visible, add to the earning power of the business, e.g. goodwill, patents, copyrights, etc.

IP Portfolio Management is a specialized form of Portfolio Management or Asset Management that is practiced by companies or individuals who own IP assets. Portfolio Management is perceived to be the domain of only already wealthy companies and high-net-worth individuals who have a lot of money to invest in acquiring assets. The thinking is that you need to have a lot of money to make money. However,

If you do not have a lot of money, but if you have Intellectual Property, you can still create a portfolio of IP assets, which if well managed, can yield high returns on investment.

The limiting factor for entrepreneurs to create great wealth is that they tend to focus on income, and not on building assets. Whereas an increased income provides more financial comfort, it typically also fuels increased expenditure and does not lead to long-term wealth creation and financial security. When Ray Croc founded McDonalds, he didn’t look at his business as a burger joint, but instead as a real estate business that would generate returns for years to come. The burger sales funded the investment in high-value real estate at prime locations around the world.

An asset has the potential to multiply returns manifold and provide returns over a long period of time. Whereas income can only increase linearly, an asset can be monetized for several times the amount of money invested in creating, protecting, and managing it. Creating and maintaining high-value assets is worthwhile at every stage of a business, from raising venture funding to growth, mergers, acquisitions, and going public. Most of the value of Fortune 500 companies today is derived from their Intellectual assets.

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