The Next Trillion Dollar Company?


Last week Amazon became the 2nd company (Apple was first) to have its market value exceed an incredible $1 trillion dollars.

Much has been said about this remarkable milestone.

But for emerging and mid-market companies hoping to grab their much smaller (but for them very meaningful) piece of this current environment’s “inflated” valuation pie, two things above all else stand out.

To best understand what they are, let’s first look at how Amazon’s stock has performed when compared to traditional metrics of value.

As of yesterday’s close, its price-to-earnings ratio stood at 180, or more than 7x that of the S&P 500, and more than 30x what smaller, privately-held businesses would normally attract from the financing and M&A markets.

Now before we say that this just shows that Amazon’s stock is wildly overpriced and ripe for a significant correction, note well that the company has commanded similarly inflated multiples for multiple decades.

So what is it about Amazon that the market is willing to value it, over a very long period of time, at levels so disconnected from its bottom line financial performance?

And more to the point here, which elements of this value creation can smaller companies learn from and emulate?

To be clear, most of what Amazon is and does is sui generis, in a class of its own.

It is so big, so able to pursue multiple extremely big and complex businesses at once (e-commerce, entertainment, transportation, logistics, grocery, private labeling, etc.), and so willing to operate these businesses for years without meaningful margins, that it is too big to be a relevant comparable for virtually anyone else.

So we have to look for more qualitative elements about Amazon to learn from, and of those, two really stand out.  

Celebrity and design.

Amazon Founder and CEO Jeff Bezos is arguably the most famous and respected business person alive today.

Combine his celebrity with the company’s design excellence - with words like functional, reliable, accessible, and futuristic associated with the Amazon’s brand, image, and persona...

...and what you have is a company that has cultivated a powerful aura that it knows what the future holds and will be able to shape that future in ways that serve its ends.

Smaller of course, but meaningful aspects of both these elements are accessible to virtually any company.

More “business celebrity” often starts with simply believing that, as business owners and entrepreneurs, we are among the most exciting - and worth celebrating - human beings.

And that acting the part of a “celebrity CEO” can be as straightforward as more outwardly and excitedly communicating our industry and market ideas and opinions.

Better design can be quickly had via business makeovers - relaunched websites, new logos and taglines, an updated business plan and pitch deck, or just a house cleaning of all the accumulated complexity and clutter of our companies.

And, as with everything else, if we can’t get it done on our own, then we pay someone to do it for us.

Hire a celebrity endorser. Or a charismatic salesperson.

Of if doing so is beyond budget and imagination, then focus on better design - hire a web developer, a marketing agency, a management consultant, an investment banker - to “spruce up” our business.

Doing so at any time builds business value, but does so especially when we are considering approaching the capital markets for growth capital and / or to sell the business.

Because as Amazon - and thousand of companies every year that attract and harvest value far beyond their financial performance - show us... modern business we don't get what we deserve or what we are “fairly” worth.

We get what our business buzz attracts to us.

Whether we like it or not.

Need More Business Buzz?

Feel your business sometimes comes across as just flat and uninteresting to prospects and customers?

Contemplating approaching the capital markets and interested in new ideas as to how to go about it?

If so, we should talk.

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