A brand is a mental image. “Branding” is the full set of activities that entrepreneurs engage in to build these mental images.
Branding includes everything from your website and your signs to the way your store looks and the way your employees treat your customers. Branding also includes polices and procedures — infrastructure that ensures your brand will be maintained for the life of your business.
When your branding activities successfully create an image in the mind of a consumer it helps them make a decision about what to buy. If automobile safety is one of my primary concerns, I’m almost certainly going to take a look at Volvo. The company has been associating its brand with that word for decades, and the consistency of their messaging has enabled the brand to consistently attract a particular set of consumers. In this way, they have set themselves apart from other car makers like Rolls-Royce and Ferrari. Even though a Rolls may be just as safe as a Volvo, “safety” has not been the primary message behind the brand. Effective branding establishes an image for your business while differentiating your business from your competitors.
These mental associations take time and require maintenance. Spending time and money to build a brand is similar to purchasing a piece of equipment that will be used to manufacture products — it enables a business to generate income over the long term if it is regularly maintained and repaired. Branding is a long-term investment*. A strong brand can improve customer satisfaction, enable expansion, improve new product launches and create a loyal customer base. If you're interested in building a company that will generate revenue for several years, you should invest in your brand in precisely the same way you would invest in quality equipment or talented employees.
(*This distinction is, however, unrelated to accounting principles and practices. Consult with a qualified accountant to choose the right way to expense branding activities.)