The investment world is undergoing a paradigm shift and the way analysts research and value companies is changing. Gone are the days of number crunching the tangible assets of a company while plugging in a “goodwill” number for the rest. In 1975, tangible assets made up over 80% of a firm’s market value – fast forward 40 years to 2015 and this has dropped to 20%. Today, up to 80% of a firm’s value can be associated with intangible assets, such as brand, reputation, culture, customer satisfaction, human capital, risk management, R&D pipelines and a company’s social license to operate. These “assets” rarely leave a clear imprint on financial statements.
The way companies control risks and create value has changed. Your ability to reduce risk and maximize value is tied directly to a “new normal” of “sustainable best practices.”
Does the current market environment favour business owners that are selling? Can you insulate yourself from market cycles by improving your “sustainable best practices,” making your business the leader in its class?