Value-based management: EVA, DCF and what investors really measure
Value-based governance: EVA, DCF and what investors REALLY measure
There is a fundamental difference between what managers learn about corporate governance and what investors (especially family offices) think about company value.
Managers often optimize for EBITDA margin. Investors optimize for enterprise value (EV). They are not the same - and often they are even opposite.
EBITDA vs. EVA vs. DCF: The Three Languages of Value
EBITDA:Earnings Before Interest, Taxes, Depreciation and Amortization. This is an "operational" metric - you see how profitable the business is today.
EVA (Economic Value Added):That's what the Stern Stewart system measures. It is NOPAT minus paid capital. It shows whether your business is actually creating more value than it costs to raise capital.
DCF (Discounted Cash Flow):This is what McKinsey and Goldman Sachs use for valuation. It is the present value of all future free cash flows.
An example:
- Company A: €5M EBITDA, but 30% EBITDA margin. This looks bad.
- Company B: €3M EBITDA, but 50% EBITDA margin. That looks better.
- But: Company A could be 200% CAGR. Company B could be 5%.
- In the DCF model: Company A is 5x more valuable than Company B.
That's why investors love "growth" so much. Growth can be compounded quadratically in a DCF model.
Shareholder value and exit multiples
A key metric for all investors (especially those with...Exit strategieswork): Revenue Multiples and EBITDA Multiples by industry.
Example software industry:
- SaaS with >50% CAGR: 15-25x revenue
- SaaS with 20-30% CAGR: 8-15x revenue
- SaaS with <20% CAGR: 5-8x revenue
- Mature software: 3-5x revenue or 10-15x EBITDA
It's all optics. The true value for family offices is always discounted future cash flows plus optional opportunities (acquisitions, international expansion, new products).
How to increase value before fundraising
The best strategy:Optimize your capital structureAND improve your value metrics.
- Scale faster (increase growth)
- Achieve higher margins (efficiency)
- Better onesKPIs etablieren(CAC, LTV, Churn)
- Addressing Larger Markets (TAM)
In the DCF model, point 1 is usually the most valuable.
Klassische Quellen
- Stern, Joel & Shiely, John (2001):The EVA Challenge. John Wiley & Sons.
- Copeland, Koller & Murrin (2000):Valuation. McKinsey & Company.
- Porter, Michael (1985):Competitive advantage. Free Press.
Read alsoBusiness valuation methodsandOptimize equity story.
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