Last week Scullion Law published an article on ‘The value of Instagram and Family Law’ which explored how Family Law solicitor, Judith Higson might deal with influencers separating when one party has a successful Instagram account that they used to generate a substantial income.
Would their Instagram account be considered matrimonial property? You can read this article here.
However, in this article we explore how an Instagram account might be valued by looking at the business entity behind it, and what approach would be taken should a marital split occur.
In order to put a value on the Instagram account, answers to the following questions would need to be gathered:
The key driver in becoming a ‘high earning influencer’ is not necessarily the number of followers an account has, but how often those followers engage with the posts and how powerful an influence that person has over the buying decisions of their audience. It is this that makes a post go viral, a brand marketers dream in reaching their target market. In addition, Brands or Sponsors associated with the account would also need to be identified, and the latest financial statements and copies of any contracts to support the income streams obtained. This would help to determine whether the Instagram account generates a regular income, and how robust or sustainable that income stream might be.
When evaluating the business, risk factors that could impact the value business would also need to be considered. For example, is the account holder in complete control of their own account and responsible for generating their own leads? Or does the account holder have an agent? Perhaps the account holder is part of an affiliate marketing database?
The value of an Instagram account is often intimately connected to the account holder and the goodwill that they command. A person’s lifestyle choices for example if brought to light, could compromise their reputation and undermine the value of their business.
If there is a marital split and both spouses have contributed to the online content and built a rapport with followers, the value could ultimately be affected. (This could be a concern for Jessica in our hypothetical scenario as explored in our previous blog).
After scrutinising all of the information outlined above, and only then, could the estimated sustainable income stream, or profit for the business be calculated. Based on the risk identified, an appropriate multiple or range of multiples to apply to the sustainable income stream would be set out for the business, which can then be used by us when valuing the matrimonial property.
Thanks to Judith Higson, Head of the Family Law team at Scullion Law for collaborating with myself on this article.
The views expressed in this blog do not form legal advice which is dependent on your individual circumstances. Each case is unique.