The Death of Lifetime
Valuation As We Knew It
Well, here it is almost a year and a half
later, and all around are strewn the wreckage of the once high-flying
dot com's. You notice how nobody is arguing valuations any more. Gone
are the days of astronomical stock offerings, propelled by ridiculously
constructed unproven models. During all the arguing, everyone seemed to
forget that General Motors never acquired a company based on the lifetime
value of its acquisition's customers.
They bought the stuff that had value,
period. But while it's fun to stomp all over the wiseguys and high flyers
who rubbed our noses in their million dollar launch parties (only to land
in either the poor house, jail -- or both), let's not forget that while
big companies like General Motors did buy value, it wasn't always the
stuff you can touch or lift.
It has almost always included the value
of the brand.
Personally, the dot com crash has been
very, very good to me. Two years after warning them that it takes more
than just technology and money to make a business happen, shell-shocked
companies are showing up at my virtual door in a daze, wondering what
went wrong -- and how can I help. All of a sudden, they realize the importance
of a brand.
About time. Yeesh.
Brand value has always been -- and will
continue to be -- a tangible asset on the balance sheet. But don't confuse
dot com puffery with real lifetime value. Too many people dismiss the
value of their brands as nothing more than the cost of the logo. Don't
fall for that. And in case that seems a tad unclear, let me give you an
Let's say you decide to sell your business
(on or off line). Let's further say that the buyer is trying to sucker
you in to a "pay you out as we go" kind of deal. A little cash
up front, participation in the revenue going forward until you're totally
That's a sucker deal, and here's why:
First, chances are you're valuing your business solely on its physical
assets and totally ignoring the value of your brand. Second, even though
you spent all that time and effort turning your vision into a reality,
realize that your buyers don't share that same vision. In fact, very often,
they view your business as a strictly cash proposition -- no vision, no
culture, no care about the brand. Which means they probably won't support
and nurture your brand and more often than not, will likely run the operation
into the ground after they've milked it dry.
Your users abandon the business, because
"it just isn't what it used to be" -- and then how much is your
stock in the company worth?
Zippo -- with no recourse. That's how
you can see the value of a brand -- as it disappears. And if it can disappear,
that means it once had great value that you should have been able to trade
for cold, hard cash when you sell.
The truth is that the notion of a "lifetime
value of a customer" never was real. It was the lifetime value of
the brand that really mattered. It still is. If the brand ain't there,
neither are the customers -- or the value of the stock.