If you had to invest in a company, how would you make a decision?
There are 3 different ways to estimate the quality of a company or an organization.
The financial evaluation is the simplest because it is based on easily available data: revenue, profits, expenses, etc. On the other hand, this estimation is not the most relevant or the most precise: you know that company A and company B generate a 10 millions revenue and a profit of 1 million. It is thus possible that these two companies are very similar or, in any case, we have no elements to think differently.
The quantitative measures allow us to improve the quality of our evaluation. If you know that company A makes its revenue with 10 deals of 1 million while company B gets the same result with 100 000 sales of 100 (€ or $, does not matter), then you can already imagine that these two companies are not similar, sell different products and probably by different channels. If we add that company A is profitable on half of its sales and slightly loses on the other half, while company B is profitable on 90 % of its sales (but with a lower margin), the picture depicted by these data clears up. On the other hand, this evaluation is more difficult to conduct because this information is rarer and more difficult to obtain. Continue reading →