Classifying the business
Before anything is priced, the engine decides what kind of business this is. That one choice sets the questions, the benchmarks, the forecast model and part of the discount rate.
Why the type comes first
Two businesses with the same sales can be worth very different amounts because they make money in different ways. A phone company that owns its own switching platform keeps far more of each dollar than one that rents a platform and resells it under its own name. So before the engine prices anything, it decides what kind of business it is looking at.
The industry code this sample sits in is a catch-all. It holds two unrelated economies: over-the-top voice providers, who sell phone seats to businesses over the customer’s own internet connection, and the satellite ground segment, who sell antenna time and contract labor on real sites. Published averages for the code blend the two, which is why the engine never prices on them directly.
The dossier’s screening test separates them on three readings: capital spending as a share of revenue, deferred revenue against multi-year contracted backlog, and the share of revenue from the largest customer. Inherited figures for the code put capital spending at 3%, 7% and 14% of revenue at the lower quartile, median and upper quartile; for an over-the-top voice provider the dossier’s own band is 0.5%, 1.5% and 3.5%.
How to read it. The pale bars are what an unscreened average would assume; the dark bars are what a voice provider actually spends. Using the pale ones would cut the value of a voice business for equipment it never buys.
The nine business types
Picking a type is the first screen of the questionnaire. The type sets four things at once: which questions you see, which industry benchmarks you’re measured against, how the revenue is forecast, and the beta that goes into the discount rate.
| Business type | How revenue is forecast | Beta |
|---|---|---|
| Hosted voice provider that owns its platform | Seat cohorts | 1.0 |
| White-label hosted voice reseller | Seat cohorts | 1.1 |
| Residential VoIP provider | Seat cohorts | 0.9 |
| Managed IT provider with a voice practice | Seat cohorts | 1.0 |
| Legacy access book winding down | Run-off annuity | 0.8 |
| Teleport or gateway operator | Capacity | 1.0 |
| Ground-station or tracking network | Capacity | 1.3 |
| Government site operator | Contract recompete | 0.8 |
| Private radar network | Capacity | 1.5 |
The sample is the highlighted row. Beta scales the market-risk piece of the discount rate.
What the choice switches on
A seat business is forecast as cohorts of seats that thin by churn each year while new seats arrive. A book that is winding down is valued as a run-off annuity. Ground-station businesses are forecast on capacity and utilization, and a government site operator on contract recompetes.
For the sample, the cash-flow method sets the headline. Market multiples are shown beside it as the prices other kinds of buyer reach. The customer book’s porting value is a floor, never the headline.
Every question’s typical range, and every “moves your value by” figure, comes from the band for your type. A reseller is measured against resellers, not against platform owners.
The type carries a beta: 1.0 for a platform owner, 1.1 for a reseller, 0.9 for a residential provider, 0.8 for a run-off book. Beta times the 4.5% equity risk premium is the market-risk piece of the rate.
How it is decided
- Order. the business type is chosen before any input is priced; the first number on screen appears after three answers
- Change. the type can be changed from the first chapter; the questionnaire, bands and forecast model switch with it
- Two economies. a choice in the satellite economy switches the forecast to capacity or recompete models and hides the seat questions
- Not a guess. if two types both fit, the owner picks the closer one and answers the first chapter; the studio checks capital spending, backlog and customer concentration against the choice and says if the numbers read like the other economy
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