102 The Financial Times Guide to Corporate Valuation
What is a value driver?
In order to understand value creation in a company, you need to locate
and understand where the value is created, which means identifying the
so-called value drivers of the business. A thorough understanding of the
value drivers and their effect on the company’s future cash flow will help
you to estimate the input variables in the DCF model.
Normally there are hundreds of value drivers, each
adding a fraction of value to the total enterprise
value (for examples of these, see the value driver
list in Appendix A). When doing a valuation,
determining, analyzing and understanding all
these value drivers is usually not possible. Instead,
you want to focus your ...