In many ways, I consider this the best strategy book, I’ve ever read. “Valuation,” by George Norton, is, as the name suggests, a book that uses financial models as a basis to build (sound) strategies. It is also a textbook—my version is hardcover and 190 pages long—but written in a format that reads easily and is structured to be implemented—ca. 30% of the book are (group-)exercises meant to implement what the book suggests.

If I had to criticise it, it’s that I don’t consider it very practical in an entrepreneurial setting. One thing that such methodologies require, is time, which is often a luxury that smaller/younger companies and projects do not have. Building up a set of co-ordinated, organisation-wide strategies can be a matter of years, and, I expect that if you were to follow the book’s advice, you’d engage in a 6 month trajectory, at least.

That said, it is a well-written book and achieves the objective of a book, which is to make understood its topic. In this case, valuation means understanding the value of companies, their products, and business activities. The financial part only really plays a part in the first third and last third of the book, while the middle is more about the actual coming up of the company’s mission, its broader goals, its objectives, and its strategies—the latter being the nitty-gritty activities of how to fulfil the grander vision.

And, where valuation comes in, everything will affect the cash position of the business: some activities may be research-intensive (= costly), but lead to greater rewards in the long-term; others will be quick-sale actions, which generate revenue, but may not always improve the long-term position of the business, unless that revenue is re-invested in more sustainable growth.

I find that these principles easily translate into small business- and individual activities, but only if taken on a holistic level, in which case reading this book may be overkill. But if you’re a finance-geek that wants to learn how to better translate the numbers into practical company-activities, or, vice versa, if you’re a creative business-person, who wants a relatively easy intro into the financial fundamentals behind strategies, then this book may be for you.

Vincent

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