Value Max vs, Profit Max Presentation by Warren Channell & M.Berkan Sonmez

Profit Max. vs Wealth Max. M. Berkan Sonmez& Warren ChannellIBA15-Marketing-10/27/2015

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Current Valuation: Up to $20.48 billion

-Founded in 2006, Twitter didn’t make any money until 2014, but its revenuedoubled to more than $420 million in the first nine months of 2013.

-Twitter was projected to generate $1 billion in revenue in

2014, and beet their projections by earning $1.397 billion by the end of the year.

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Current Valuation: $11 billion

-The company had two huge financing rounds in 2013 and an additional round in early 2015. The company is quickly becoming one of the most high-valued private tech companies on earth. -Investors are big on

Pinterest because it attracts young, high-income women, a key

advertising demographic.

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amazon

Current Valuation: $280.2 billion- Surprise! The world’s largest online retailer just posted a $188 million loss in its most recent quarter.

- Current losses are part of an aggressive expansion across multiple sectors.

-Investors don’t seem to mind as Amazon’s stock price has increased by more than $100 per share, since the start of 2015.

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A financial concept that a company can implement to make the most profit in the short run.

Profit Maximization?

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Wealth Maximization

A financial concept that a company can implement to increase its value in the long run. 7

Concept > Strategy > Practice

Implementation : -Wealth Max -Profit Max

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PROFITPROFIT

SOCIETYMARKET SHARERISK & TIME

PROFIT MAXIMIZATION(Short Run)

VS. WEALTH MAXIMIZATION(Long Run)

COMPANY

CREDABILITY

VALUE OFFERING

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What is the bigdifference?

Profit Max = Short Run Concept Ignoring the timing of returns, cash flows, & risk.

Wealth Max = Long Run Concept Including the timing of returns, cash flows, & risk as a decision making variable.

TIME

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Are theysuccessful?All companies are willing

to generate profit and have a better cash flow.

Few companies focus on other aspects like:

Sales, Market Share, Risk, Credibility, Etc.

Wealth Max. = Success.13

How can theysurvive?

-Eventually a Wealth Max. approach may look bad from the outside because of years of loss or “0” dollar profit.

-However, investors are also more likely to invest on long term players because of future growth possibilities and value creation.

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Profit Max vs. W

ealth Max

Concept > Strategy > Practice

Simple vs. Broad

Myopic vs. Broad Spectrum

Old vs. New

Short & Long

Volatile vs. Sustainable

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In Conclusion

THANK YOU

“CEOs who put stakeholders’ interests ahead of profits generate greater workforce engagement and thus deliver the superior

financial results that they have made a secondary goal.” – Harvard Business Review

(December, 2009)16