The rise of influencer businesses: What investors and influencers need to know
The rise of influencer businesses: What investors and influencers need to know
In the fast-paced world of social media influencers are no longer just content creators — they’re entrepreneurs building multi-million-dollar businesses. Yet, how do you value a business tied so closely to personal brand and reputation? From understanding the difference between influencing and influencer-owned businesses to navigating the risks of cancel culture, this article breaks down the complexities of influencer business valuation for both investors and influencers.
It’s hard to imagine a time before social media — before the instantaneous nature of viral moments, before influencers became household names, and before a single post could launch a career or a business. Today, influencers are more than content creators, they’re entrepreneurs, brand builders, and, in many cases, the driving force behind multi-million-dollar businesses. However, as the influencer economy matures, it presents new challenges — including how to assign value to businesses built on personality, reach, and reputation.
Whether you’re an investor exploring the fast-growing world of influencer-backed brands or an influencer seeking to understand the value of your brand, it’s clear that valuing influencer-driven businesses is not straightforward.
The rise of influencer-owned businesses has blurred the lines between personal brands and commercial enterprises. But how do you determine the value of a business that is deeply tied to an individual’s social media following and personal goodwill? And what happens when the influencer’s star power fades or, worse, faces a public scandal?
Influencing business vs influencer-owned business: Why the distinction matters
At the heart of influencer business valuation lies a critical distinction: The difference between an influencing business and an influencer-owned business. While the terms may sound similar, the implications for valuation are not.
An influencing business is one where revenue is generated directly from the influencer’s activities — think brand deals, ad revenue, sponsorships, or even subscription-based content. In these cases, the business is essentially the influencer themselves. The revenue streams are tied to their ability to create content, engage their audience, and secure partnerships. But here’s the catch: the value of such a business is dependent on the influencer's personal brand. If the influencer steps away, the business loses its primary asset.
On the other hand, an influencer-owned business, by contrast, is one where the influencer leverages their name and following to launch a product or service. While these businesses may benefit from the influencer’s promotional power, they often have a foundation that can stand on its own. The product or service can exist beyond the influencer’s day-to-day involvement — which means the business carries transferable goodwill, a key consideration when it comes to valuation.
The role of personal goodwill in valuation
One of the most challenging aspects of valuing influencer businesses is accounting for personal goodwill. In simple terms, goodwill is the value of a business that exceeds the worth of its tangible assets. It includes intangible elements — brand reputation, customer loyalty, and, in the case of influencers, their personal connection to their audience.
But personal goodwill is a double-edged sword. While it can significantly boost the value of a business, it is non-transferable. If an influencer’s business is entirely dependent on their personal brand, a potential buyer would be unlikely to pay for goodwill. The buyer cannot step into the influencer’s shoes and take over their brand deals or social media presence.
This is why influencer-owned businesses often have a higher valuation potential. By creating a product or service that can stand on its own, influencers build goodwill that can be sold. For example, a beauty brand that began with influencer promotion but has since developed its own identity, loyal customer base, and reputation for product quality could continue to thrive — even if the influencer steps back from day-to-day involvement.
The challenges of forecasting revenue in a volatile landscape
Valuing an influencer business is about understanding the current revenue streams — but it’s also about predicting the future. In the world of social media, where algorithms change overnight and trends come and go, forecasting revenue is no easy task.
Take YouTube, for example. A Canadian influencer with millions of subscribers might generate significant ad revenue from their videos. But if they were to sell their channel, how long would that revenue last? Without new content, views would inevitably decline, and the algorithm would stop pushing their videos. This makes it difficult for buyers to justify paying for more than a year or two of projected revenue.
TikTok presents a different challenge. Unlike YouTube, TikTok does not directly generate revenue for Canadian influencers. The value of a TikTok account lies in its ability to drive brand deals or redirect followers to other revenue-generating platforms. In these cases, value relies on market-based approaches, such as comparing the account to ones that have been sold on online marketplaces.
The impact of reputation and cancel culture
In a world where a single social media post can make or break a career, the risk of reputational damage is a significant factor in influencer business valuation. Cancel culture looms large, and investors need to consider how reliant a business is on the influencer’s personal brand.
Reputational risks are real, but they don’t always have a lasting impact on business influencers create. When the brand has its own distinct identity, separate from the individual, it’s more likely to withstand public scrutiny or backlash. That’s why a strong, independent brand presence is essential for mitigating personal brand risks in influencer-owned businesses.
Strategies for building transferable goodwill
For influencers looking to maximize the value of their business, the goal should be to build transferable goodwill. This means creating a brand that can stand on its own, even if the influencer steps back. Here are a few strategies to consider:
- Develop a standalone brand identity: Avoid naming your business after yourself. Instead, create a brand with its own unique identity. This makes it easier for the business to continue thriving without the influencer’s direct involvement.
- Focus on product quality: A strong product or service offering is crucial. If customers are buying because they love the product — not just because it’s endorsed by a famous influencer — the business will have more staying power.
- Diversify revenue streams: Do not rely solely on social media platforms for revenue. Explore other avenues, such as subscription services, merchandise, or even educational courses.
Navigating the future: Key takeaways for influencers and investors
Valuing an influencer business is both an art and a science. It requires a deep understanding of the influencer’s personal brand, the business’s revenue streams, and the ever-changing social media landscape. For investors, the key is to look beyond the influencer’s star power and assess the underlying value of the business. For influencers, the goal should be to build a brand that can stand the test of time — even if they are no longer in the spotlight.
As the influencer economy continues to grow, one thing is certain: businesses that succeed will be those that balance personal brand power with commercial viability. Whether you’re an investor or an influencer, understanding the nuances of valuation is the first step toward making informed decisions in this dynamic and rapidly evolving space. If you’re ready to take the next step — whether it’s valuing your business, exploring investment opportunities, or building a strategy for long-term success — our team of advisors are here to help. Let’s navigate it together.
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