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 example:

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 paid out.

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.

Rob Frankel