The Value Equation

Chapter 15The Art of the Possible

By now, you should have a clear idea of the important business model attributes that collectively characterize the finest companies.

At the top of the list is an ability to produce high equity returns. Companies capable of producing the highest returns on equity with the lowest use of OPM tend to be some of the finest vehicles for wealth creation.

If your business is highly scalable and has the potential to harness operating leverage, so much the better.

Finally, if your business has the potential to assume a leadership position within a large global marketplace, then it has the potential to be a veritable unicorn. And, if you are fortunate to be a founder or leader of such a business and have the ability to retain a large ownership stake, then you have the chance to become an individual unicorn.

The vast majority of successful companies do not come close to the business model ideals that might gain you a unicorn ticket to the Forbes 400. For one, most companies do not service the needs of large global markets, instead focusing on narrower constituencies. Unless your business model is centered on technology or an “asset light” operational approach, you will likely benefit little from operating leverage. In other words, your business model will require business investment growth on a pace closer to your revenue growth if you want to expand. Many companies simply have difficulty scaling to a larger size. Most companies require generous amounts ...