5 ms·

Your definition is the social media-fueled snake oil meme.

chiefalchemist 3y ago
One very simply question: What defines value better than an exit? Or the offer to exit? (Hint: Nothing.) You might not like the definition, but that doesn't mean it's wrong.
- ceejayoz 3y ago
  Exit valuation doesn't come from God. It comes from metrics like growth, profit, etc., all of which are readily available without actually exiting. Even if we accept your assertion that it's the best way to value something, that doesn't mean it's the only way to value something.
  - chiefalchemist 3y ago
    Nah. Not at all. Those are all proxies. It comes from The Market. It comes from some other entity saying, "This is worth X to us, and we're willing to pay that. Here's an offer." THAT is value. I've already said this, but I'll say it again: Revenue !== value.
    - ethanbond 3y ago
      Revenue actually is value (a subset of it) delivered to the business's customers. Enterprise value is a different thing. It's an important thing, but it's totally possible to have a business that delivers immense value to its customers and has very low enterprise value. We generally call these "not great businesses," but that doesn't make them not businesses.
      - chiefalchemist 3y ago
        Not really. You can for example generate $1,000,000 in revenue and not generate value. Perhaps you're not profitable, and therefore perhaps not attractive to being bought. That is, no value. Value is what someone is willing to pay (for the company). It is set by the market. Revenue may or may not be used by the suitor to determine value, that is, how much they're willing to pay to acquire the generated value. Revenue !== Value To clarify, they are all business in the legal sense. But a "solopreneur" who gets hits by a bus, leaves customers high and dry, and can't exit (i.e., have someone else carry on) is not to compared to an entrepreneur who generates value such that an exit is possible, and customers are less likely to get screwed.
        ethanbond 3y ago
        You are specifically referring to a concept called “enterprise value.” Notice the modifier. That indicates it is not the only (and to many people, not even the most important) type of value.
- ethanbond 3y ago
  So that value just magically appears at the moment of offer to exit?
  - chiefalchemist 3y ago
    Yup. Something is only worth what someone else (i.e., The Market) is willing to pay for it. You can stack up a ton of customers and revenue but if no one else wants it...sorry...no value. At the extreme, imagine all these social media "creators". In some cases, tons of revenue. But their revenue-producing-hobby is such that no one could take the torch and carry on. If that person is abducted by aliens, the company also disappears. No one else can buy it and carry on. That is, no value created. I'll keep repeating this: Revenue !== value Entrepreneurs create value. Not revenue. Value. The problem with this thread seems to be that people are confusing revenue with value. If it was about revenue, then the definition would say that. It specifically says value.
    - ethanbond 3y ago
      > Revenue actually is value (a subset of it) delivered to the business's customers. Enterprise value is a different thing. It's an important thing, but it's totally possible to have a business that delivers immense value to its customers and has very low enterprise value. We generally call these "not great businesses," but that doesn't make them not businesses.
      - chiefalchemist 3y ago
        Not really, revenue is not value. It's used as a proxy but it's not a true indicator of value. An extreme example, LOADS of revenue but also loads of expenses (i.e., not profitable). Is that "creating value"? I think not. Or again, the "influencer" model. TONS of revenue but when was the last time you heard of such a person selling? They're not because there's no value. The influences walks away, the house of cards collapses. No one is going to pay for that. So, sorry, no value - regardless of revenue. Therefore, if you ever want to know the value of your business as a reflection of the alleged value it creates, put it up for sale (or sell shares). You will quickly find out if you're actually creating value or not, or at least someone thinks you have the potential to create value. But that isn't revenue. That's it. You want to measure value? Then be prepared to ask the market (i.e., exit) Anything else is a proxy, a deception, or something you tell yourself to make yourself feel good.

One very simply question: What defines value better than an exit? Or the offer to exit? (Hint: Nothing.) You might not like the definition, but that doesn't mean it's wrong.

ceejayoz 3y ago
Exit valuation doesn't come from God. It comes from metrics like growth, profit, etc., all of which are readily available without actually exiting. Even if we accept your assertion that it's the best way to value something, that doesn't mean it's the only way to value something.
- chiefalchemist 3y ago
  Nah. Not at all. Those are all proxies. It comes from The Market. It comes from some other entity saying, "This is worth X to us, and we're willing to pay that. Here's an offer." THAT is value. I've already said this, but I'll say it again: Revenue !== value.
  - ethanbond 3y ago
    Revenue actually is value (a subset of it) delivered to the business's customers. Enterprise value is a different thing. It's an important thing, but it's totally possible to have a business that delivers immense value to its customers and has very low enterprise value. We generally call these "not great businesses," but that doesn't make them not businesses.
    - chiefalchemist 3y ago
      Not really. You can for example generate $1,000,000 in revenue and not generate value. Perhaps you're not profitable, and therefore perhaps not attractive to being bought. That is, no value. Value is what someone is willing to pay (for the company). It is set by the market. Revenue may or may not be used by the suitor to determine value, that is, how much they're willing to pay to acquire the generated value. Revenue !== Value To clarify, they are all business in the legal sense. But a "solopreneur" who gets hits by a bus, leaves customers high and dry, and can't exit (i.e., have someone else carry on) is not to compared to an entrepreneur who generates value such that an exit is possible, and customers are less likely to get screwed.
      - ethanbond 3y ago
        You are specifically referring to a concept called “enterprise value.” Notice the modifier. That indicates it is not the only (and to many people, not even the most important) type of value.
ethanbond 3y ago
So that value just magically appears at the moment of offer to exit?
- chiefalchemist 3y ago
  Yup. Something is only worth what someone else (i.e., The Market) is willing to pay for it. You can stack up a ton of customers and revenue but if no one else wants it...sorry...no value. At the extreme, imagine all these social media "creators". In some cases, tons of revenue. But their revenue-producing-hobby is such that no one could take the torch and carry on. If that person is abducted by aliens, the company also disappears. No one else can buy it and carry on. That is, no value created. I'll keep repeating this: Revenue !== value Entrepreneurs create value. Not revenue. Value. The problem with this thread seems to be that people are confusing revenue with value. If it was about revenue, then the definition would say that. It specifically says value.
  - ethanbond 3y ago
    > Revenue actually is value (a subset of it) delivered to the business's customers. Enterprise value is a different thing. It's an important thing, but it's totally possible to have a business that delivers immense value to its customers and has very low enterprise value. We generally call these "not great businesses," but that doesn't make them not businesses.
    - chiefalchemist 3y ago
      Not really, revenue is not value. It's used as a proxy but it's not a true indicator of value. An extreme example, LOADS of revenue but also loads of expenses (i.e., not profitable). Is that "creating value"? I think not. Or again, the "influencer" model. TONS of revenue but when was the last time you heard of such a person selling? They're not because there's no value. The influences walks away, the house of cards collapses. No one is going to pay for that. So, sorry, no value - regardless of revenue. Therefore, if you ever want to know the value of your business as a reflection of the alleged value it creates, put it up for sale (or sell shares). You will quickly find out if you're actually creating value or not, or at least someone thinks you have the potential to create value. But that isn't revenue. That's it. You want to measure value? Then be prepared to ask the market (i.e., exit) Anything else is a proxy, a deception, or something you tell yourself to make yourself feel good.