Finding The True Value In Business Today

by Jerri Hemsworth | May 24, 2012 4:59 pm

What an amazing time it is to be in business. Social media has everyone scrambling to rethink the value of their own marketing and how can it be leveraged into actual profit. But let’s be realistic, folks.

Facebook just went public. Initial valuation estimates were between $90-120 billion. In some people’s minds, this company was worth more than McDonald’s, Bank of America, Kraft Foods and/or CitiGroup before a single share of stock was sold. Really? Yet, look at the hit the stock took on its second day of trading. Where is its real value?

Facebook does have more than 900 million sets of eyeballs that make up its user base. There’s definitely value in that. But how much value? Currently, it’s generating a couple bucks of revenue per user annually. That’s not much, and it’s far below the industry norm. Google generates nearly 8 times that in per-user revenue. What does it mean when General Motors just pulled its plug on advertising on Facebook since it was not helping them sell cars? Certainly nothing good.

Other than users, what are the assets? McDonald’s has recipes, stores, franchise revenue streams, real estate, trademarks and subsidiaries generating tons of revenue. Bank of America has loans, fees, credit cards, mortgages and other revenue sources.

I’m reminded of AOL, which if you recall, was sold in 2000. It was valued somewhere north of $150 billion, only to become one of the largest value declines in history. It’s currently estimated to be valued at around $5 billion or less.

What is a company worth? Or a product? Or a piece or art? Well, the simple answer is, “What someone will pay for it.”

Here at Southern California Professional, it’s fun to follow the rare big business news such as the Facebook IPO, but we live and breathe the realities of everyday business. We’re more concerned with your business, your clients and your products and services.

Maybe you’re an M&A attorney or an accountant helping a client buy a business. Maybe you’re a business owner who someday wants to sell your business, but your biggest concern is making it more profitable now. You live in a more realistic world of day-to-day business.

You’ve come to the right place. We’ve put together another issue full of business, legal and financial insight to help you do better at what you do. The information in this issue will truly help you find and increase the value of your business. So sit back and enjoy another great issue of Southern California Professional Magazine! •

Jerri Hemsworth
Publisher

Source URL: http://www.socalprofessional.com/2012/05/finding-the-true-value-in-business-today/