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While no value alone is sufficient, the combination of these values will bring sustainable and profitable growth. As can be noticed, neither machinery investment nor balance sheet size can guarantee the future of businesses in the business world today. Companies can increase their value only when they prioritize their employees, customers, and the corporate culture that fuels innovation.
Various criteria are considered in calculating company value. Besides the balance sheet data, the sector in which the business operates, the quality of profitability, profit margins, sustainability of profit, growth plans, quality of free cash flow, return on equity, performance, and experience of the management staff, ethical and environmental policies are particularly important in company valuation. Financial statements provide information about the financial structure and economic power of the business, and they are used as the basis for the valuation study. However, there are businesses with 2-3 folds or even 10 folds of their balance sheet values today. Especially in the digital economy companies such as Google, Facebook, and Microsoft, brand value constitutes the majority of business value. An internet company founded three years ago can be 10 folds more valuable than a thirty-year-old industrial company due to its competitiveness strategy, scalability, and future potential. In particular, the internet can rapidly carry the scale economy to the global scale. Thus, values such as brand management and customer experience can make many global brands have company value of billions of dollars without having a single factory. Today, the most important thing is customer experience (net profit) rather than production (fixed assets). Businesses are valuable to the extent of their current and future profits. 'Cash is no longer the only value.' Cash is an important financial asset; however, it is not the only value. What you do with your current cash is more important. Who manages your cash, how it grows profitably, how much of the cash has been obtained from external sources, and how much of it has been created by the equity are important issues. Cash is still king, but what matters is how you organize the gears of the machine that produces the cash. For a good business, cash is the easiest source to obtain. There will always be investors who want to invest in or banks that want to give credit to good businesses but a team that manages cash poorly, an incorrect sector, no competitive advantage, and shareholders without vision will not be able to create "value" in the long run. Today, brand value comes to the fore more. The intellectual assets of the business, especially the brand, better reflect the real value of the business. To conclude, businesses should focus on intangible assets. Only such assets can carry the business to the future and create sustainable profitability. Businesses should invest in the assets required to achieve a perfect customer experience. These assets should be R&D, human resources, concrete future strategies, innovative company culture, and corporate governance rather than real estate, machinery, and vehicles. The new values of the new world consist of these assets. Gökhan ACAR / CEO VALURA |
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