Everybody has heard about the equity of a company and how it is crucial to managing the equity for the stability and proper functioning of the business. Equity is an investment in your company’s success, and it is also a great way to attract and retain your employees. Equity management is indeed a tough job. There’s a lot to do and anticipate the business’s future while dealing with equity.
What is the management of equity?
If you are dealing with equity in management’s decision-making, you can define it as the process of making and managing owners in your firm. It involves reporting changes in ownership, tracking every detail of the business, updating documents, and many more things. Communicating with the stakeholders and consulting the board of directors are necessary tasks one must complete while managing the equity, and one must also stay compliant throughout the process.
And in simple terms, equity is a measure of a firm’s total assets subtracted from the total liabilities. And equity management means controlling the outcome of a business’s assets without factoring for liabilities.
In the same way, a company manages the equity in financial terms, and it needs to manage its brand equity. But, what does brand equity management means?
Brand equity
You can define brand equity in three ways:
The consumer-based definition can be defined as a measure of consumers’ feelings toward a brand. You can also call it the strength of the brand or brand loyalty. It is a quantifiable thing.
Marketing definition is the detailed report of a consumer’s association and faith in a brand. It is usually non-quantifiable. Brand equity is tailored as per the requirement and demands of the consumer.
Accounting definition: you can define it as a total value of a brand as a separate asset when evaluating for selling. It is called brand value. This is a quantifiable term.
The image of a firm is dependent on the proper management of the brand image on every platform, especially on social media.
The next step in managing equity is the management of the capitalisation table. It is also known as the “cap table”—represents the breakdown of the startup’s ownership by stakeholders. This table makes it easy to see who owns what, and it makes it easier for the investors to calculate and observe the company’s capital structure.
How can one efficiently manage and understand the cap table?
The cap table is similar to the business’s balance sheet, and it shows the firm’s position at the given time. One can also use this table for future references. As the balance sheet shows the firm’s liabilities and assets, the cap table shows its ownership and the economic and voting rights of the individuals involved.
Usually, the cap table is beneficial for the startups and new sister concerns in another state.
Steps in cap table management for startups can be listed as:
- Understand the fundamentals of basic elements and formats of the cap table
- Recognise why the executive alignment is vital
- Analyse and implement tools to help you in managing things in the table
- Finalise and delegate ownership of the cap table
- Manage the information to share with the investors
- Decide how much to share with the employees
The management of equity is the priority of any organisation, and if done correctly, the business will run successfully. Use these tips to make the correct decisions while you do the equity management of your business.