Looking forward

The best day of business school was when I learned that business is just us kids making guesses.

One of the things I was looking forward to most in business school was learning how to value a company. I figured there had to be some special formula that helped pull Excalibur from the stone and know the true worth of a business.

What I paid a significant sum to learn I could’ve learned from Shark Tank: valuation isn’t a formula, it’s optimism.

Anyone who has watched a few episodes of Shark Tank has seen the valuation discussion play out:

The founder asks for $200k for 10% of their company, valuing the company at $2M.

One shark offers $200k for 15%, valuing the company at $1.3M.

Another offers $150k for 10%, valuing the company at $1.5M (it’s early and I really hope I did this math right…).

There isn’t just one way to value a company (read more about that here) but they all include a prospective buyer estimating how much money the company will make for them over a ~5–10 year horizon. They all rely on a bet on what will happen in the future.

Shark Tank is a great example of this because a lot of the companies on the show are hardly businesses. They’ve made negligible revenue, they don’t have distribution, their supply chain is a mess, they haven’t even begun marketing, etc.

All they have is a story about how they could win with a little rocket fuel in their jets.

The late Paul Van Doren, founder of Vans and lifelong horse race bettor, writes, “I was never really a gambler, I was a guy who calculated the odds.”

Making a bet on what is going to happen in five years is a huge gamble, even if you remove black swan pandemics. Whether you’re calculated like James Bond or devil-may-care like Evel Knievel, you’re still jumping out of a plane.

It’s magnified when you take a longer look at history, which tells us the safest bet is that things will change.

But while we can’t control the market’s turbulence, we can control our focus and navigational skills. Van Doren again: “Quite often a horse will need to wear blinders only once, and from then on they can see their goal clearly.”

Even if few of us in marketing and creative fields are opening Excel to value companies, we are helping clients and other stakeholders make bets. We help light the path between where we are and where we want to be. We tell informed stories about how we win. We imagine the future using the best evidence we have — a past whose relevance fades quickly.

So maybe valuation (that is: the future of a brief, a brand, a business) isn’t something to calculate, but faith in what we can control, powered by optimism.

Shark or horse or swan or bear or bull. Make a big bet and see where focus can take you.