The business assets you can’t see but should be protecting

Boxers & Briefs Podcast #25: What is your intrinsic value? Intangible assets with Michael Masterson

Most businesses are sitting on value they don’t even know exists. While everyone focuses on tangible assets like desks and computers, the real value lies in what you can’t kick with your toe. These are your intrinsic assets, and they’re probably worth more than anything else you own.

Michael Masterson, Principal of Intrinsika, has spent years helping companies discover and monetise these overlooked assets. His track record speaks volumes. Take AirTrunk, a company that every Big Four accounting firm told to ‘go get a job’ because they were apparently worthless. Fast forward a few years, and offers are rolling in for $15-16 billion.

What makes you different

The fundamental question every business needs to answer is simple: what makes you different? If you can’t articulate this clearly, you’re leaving money on the table.

Consider Kelly Partners, Australia’s fastest-growing accounting firm. When Michael first met founder Brett Kelly, their shares were sitting at 80 cents. Brett knew his company was worth more but couldn’t explain why. The problem wasn’t the tangible assets. Anyone can replicate desks, chairs, and computers. The value lay in knowledge, processes, brand recognition, and relationships.

By helping Brett identify these intrinsic assets, the company’s share price climbed to $7.62 within four years. The tangible assets barely changed. But Brett became skilled at explaining the value that couldn’t be seen on financial statements.

The 90-10-1 rule

Michael’s research reveals a pattern most businesses miss. Roughly 90% of non-physical assets are easily replicable. Your website, your podcast, your procedures. Anyone with time and money can copy these.

The next 9% contains things like knowledge, know-how, and trade secrets. This is where roughly 9% of your business value sits. The remaining 1% of volume usually contains over 90% of your value. This includes brand recognition, customer relationships, and unique market positioning.

You could set up an accounting firm next door to Gilligan Sheppard with identical equipment. But you wouldn’t have Bruce Sheppard. You wouldn’t have the brand recognition. You wouldn’t have clients who ring up because they trust the people behind the name.

Four questions that unlock growth

Michael breaks business valuation down to four questions most companies never properly answer.

First: What do you do? Most businesses overcomplicate their answer. If you need 96 pages to explain your business model, you’re wasting someone’s time.

Second: Why do people buy from you? Not why you think they should, but why they choose you over alternatives.

Third: How will investors get their money back at a greater rate than their alternatives?

Fourth: How will you stop competitors from replicating what you do? This links directly to sustainable margins and market share. Yet it’s rarely addressed in business plans.

Apple provides a clear example. If you want access to the Apple ecosystem and App Store, you must use Apple products. That’s their competitive advantage.

The AirTrunk story

When Robin Kuda called Michael, he’d been told by multiple Big Four firms that his business was worthless. But Michael saw something different.

Robin’s opening statement was telling: “I’ve come up with a way to run a computer data centre at half the operating cost of everyone else.” He’d outlined a 50% cost advantage in an industry where competitors typically vary by 1-2%.

Initially, Robin planned to file a patent. Michael explained why this would backfire. No judge would prevent Google or Amazon from implementing cost-saving technology in their facilities. Instead, they protected the innovation through trade secrets.

The business was valued at $100 million. Industry peers thought Michael had lost his mind. Then Microsoft became a customer. This wasn’t just about revenue. It was endorsement from a technology giant. The valuation jumped to $200 million. Three years later, Macquarie Group bought 78% for $3 billion.

Why traditional valuations fall short

Traditional financial documents don’t capture where real value sits in modern businesses. Balance sheets, profit statements, and asset registers simply miss the mark. As one head of a major accounting firm admitted, “Balance sheets haven’t reflected true business value for 40 years.”

Companies focus on what’s measurable while ignoring the assets that drive growth, customer loyalty, and competitive advantage.

Michael uses a four-legged chair analogy for proper valuation. The four legs are: underlying assets (particularly those not captured in financial documents), context (why the valuation is needed), timing (market conditions), and explanation ability (can you articulate the value to decision-makers).

Negotiation matters

Even accurate valuation means nothing if you can’t close the deal. Michael learned this from Bruce Sheppard during a negotiation where Bruce announced: “The other side doesn’t know how to negotiate. We’re going to have to teach them.”

When selling to large corporations, the person you’re negotiating with often isn’t the final decision-maker. They need to convince an M&A team, who might need approval from a credit committee, who could require board sign-off.

If you can’t explain your value clearly enough for each person to champion your case, the deal falls apart.

Three paths to monetisation

There are three ways to monetise business innovation.

Deployment involves building operations yourself. Hiring teams, establishing infrastructure, taking on capital requirements and risks. This is what AirTrunk initially chose.

Licensing allows others to handle capital investment and risk while paying you fees for access to your knowledge or trade secrets.

Direct sale means someone pays you a large sum for your innovation. This is happening to AirTrunk now with the $15-16 billion offers.

Smart companies often combine approaches. One of Michael’s New Zealand clients deployed locally, licensed into the US, and sold rights for the Middle East.

The expertise gap

Michael asks a simple question about business advice: “When was the last time you lay awake at 3am wondering about payroll?” Unless advisors have lived through business ownership stress, their advice remains theoretical.

This applies particularly to export advice. Michael’s rule is direct: “Don’t take export advice from people who aren’t gold elite airline status, because they’re not out there doing it.”

Well-intended advice from people without relevant experience can be costly.

Getting started

Identifying intrinsic assets isn’t complicated. Michael breaks them into ten categories: brand, knowledge and know-how, trade secrets, registered rights, customer relationships, supplier networks, strategic partnerships, proprietary processes, market position, and human capital.

Start by listing what makes your business different. Are they easily replicable (90% category), strategically important (9% category), or truly unique competitive advantages (1% category where 90% of value sits)?

Assess the risks. Who has access to these assets? Are you about to share them through joint ventures? How are you protecting what matters most?

Consider monetisation opportunities. Could you license certain capabilities? Are there partnership opportunities that leverage your strengths?

The competitive advantage equation

Michael’s framework is simple: competitive advantage enables premium margins, which can be reinvested for market share growth, which generates superior returns on capital, which attracts more investment capital.

This only works if you can prevent competitors from replicating your advantages. Answer the four fundamental questions, identify and protect your intrinsic assets, and you’ll never need to pitch for capital again. Capital will pitch for you.

Your intrinsic assets are sitting there right now, probably unidentified and undervalued. The question isn’t whether they exist. It’s whether you’ll recognise them before your competitors do.

This article and podcast is proudly brought to you by Gilligan Sheppard, the problem solvers in business who believe in thinking differently.