Customer Relationships, Customer Equity and Intangible Assets

Despite the shift to a customer-centric view of business in the 21st century, the financial value of customers to a firm lacks its establishment in the financial perspective of business. To support this research stream, this paper argues that the value of a firm’s current customers, which hides in the firm’s internally generated goodwill, fulfills the criteria of an identifiable off-balance sheet intangible asset that can be reliably measured and applied in company valuations. Based on the international accounting standards, this paper shows that customer relationships based on recurring exchange transactions represent the off-balance sheet intangible asset deriving from current customers and that it can be valued with a specific concept of customer equity. To support the integration of customer-based values in financial analyses, this paper introduces a financial multiple, which considers the value of a firm’s current customers and shows that this multiple provides additional information on the true value of a firm and its stock.