Publisher's Note: From presidents and policy makers to entrepreneurs and venture capitalists, many leaders today assume the old rules of business and its valuation rewards are instinctive, ineffable, and remain as valid today as they were a generation or two ago in "innovation time."
Bill Ribaudo, through his ongoing research into how the markets have valued different business models, has proven this to be far from true. More important, he has provided detailed guidance to all of these interested parties, from traditional F50 CEOs to startup entrepreneurs, on how to move their valuation models upstream by factors approaching 8x over classical models.
While everyone may still assume that customer demand and satisfaction remain primary drivers of business success, Bill and his team have moved the theory into the 21st century, showing the impacts of technology created, IP value and protection, and network effects, on how the markets see companies, and how we all should see country GDPs.
In this Special Letter, Bill and his team move further forward in explaining the benefits of paying close attention to the effect of these tech-related operators on valuation. Whether you are an investor, a CEO, or an inventor, you will want to read this week's issue in order to understand where to put your money, how to manage your company, or which type of product to build next. - mra.
[Ed. Note: We're delighted that Bill Ribaudo will be speaking at FiRe 2018 in October. To be there for his talk and Q&A, and insights by other experts from varied industries on what to expect in the next 3-5 years, sign up now at .]
The Great (Country) Race: Company Business Models
by Bill Ribaudo
In business, the customary wellsprings of value creation have been clear for decades: Create products and services that the market requests and sell it for a profit. Investors have rewarded this mindset and valued organizations in view of their capacity to make a profit, given a specific set of physical resources. In the present economy, however, we're seeing a new breed of business valuation, one that values companies differently. Organizations that have yet to turn a profit command market capitalizations into the billions. Today, investors are measuring, and rewarding, value very differently than they have in the past - and we believe that such valuation is neither a bubble nor a fad.
This paper reviews the Revenue Multiplier business model framework and explores the implications of our research beyond business strategies and capital market valuation, discusses how gross domestic product (GDP) correlates to business model, and - more important - how insights gained could be used by leaders to incentivize businesses. These findings are about understanding how to recognize and take advantage of trends to create opportunities for economic growth. For corporate leaders, we share insights for consideration about geographical and geopolitical investment strategy.