Investment Projects Portfolio

Another way to approach this challenge (measuring, managing and maximize financial value of your company), is to view your company as a portfolio of investment projects. To maximize the shareholders’ value of your company, you must obviously maximize financial value created by each of these projects.

I will cover these projects in detail in Part II (mostly) and Part III. Here I will only briefly mention the three main categories of these projects.

Each corporate project may be either perpetual (‘going concern’ or ‘indefinite duration’), finite (‘fixed duration’) or special. The main difference between these categories in terms of measuring, managing and maximizing financial value is that each of these categories has significantly different financial valuation models.

Perpetual investment projects include your business entity as a whole; your [strategic] business units; your regional (geographic) branches; your retail locations (e.g., retail stores or service centers); your target markets; your brands (although in some cases your brand can have a limited life span); your customers; and your other stakeholders. Other than your customers, that is.

Finite investment projects include your corporate tools (which have very much finite useful life); your corporate Web site (that needs to be redesigned completely once in a while); your social networks pages (same reason); your employees (who inevitably retire or leave your company in some other way); your corporate communications campaigns (fixed duration by definition); and your computer hardware and software items (that are just special kinds of tools).

True, you can theoretically treat your Web site and your social networks pages as perpetual projects but given the inevitable radical redesign due to no less inevitable technological advances, it would be more accurate to treat them as finite projects. Your corporate Intranet is a somewhat special case as it can be either perpetual or finite.  

Other special cases (albeit of a different nature) are your internal value centers that I will cover in ‘Organization Structure’ section; your functional units, such as your accounting or marketing department; and your corporate processes.

These investment projects are ‘special’ in a sense that – unlike abovementioned projects – they do not generate revenue directly (hardware and software items and your Internet generate revenue by cutting costs). Therefore, they require ‘special’ valuation models that I will cover in Part II. Valuation models for two other categories of investment projects will be covered in two subsequent sections.