Data Economics

Enabling chief data officers and investors to tie the financial value of data to enterprise value

Aligning Data Monetization to Financial Metrics

Sunil Soares
CEO
YourDataConnect

In a recent blog, I questioned whether CFOs consider the Chief Data Officer to be accretive or destructive to Enterprise Value. 

Data Monetization efforts yield results across four dimensions:

  1. Grow Revenues
  2. Reduce Costs
  3. Manage Risks
  4. Improve Cash Flows

There is a potential fifth dimension in terms of Environmental, Social and Governance (ESG) but that is a topic for another day. 

Each dimension has a different impact on the stock price. For example, Ford Motor Company (Ticker Symbol: F) has an Enterprise Value/EBITDA ratio of 8.27. Enterprise Value equals Equity Market Value Plus Long-Term Debt. EBITDA is Earnings before Interest Tax, Depreciation and Amortization. So, a dollar in cost savings due to data monetization results in an increase of $8.27 in Enterprise Value (essentially stock market value).

In the same vein, Ford’s Enterprise Value/Revenue ratio is 1.30. A data monetization business case that grows revenues by $10 million will result in an increase in Enterprise Value by $13 million.

Finally, Ford’s ratio of Enterprise Value/Free cash Flow is almost 7. This means that a data quality initiative that reduces Accounts Receivable by $50 million will increase Free Cash Flow by the same amount and will result in an increase in Enterprise Value by $350 million.

Data Management professionals need to become financially literate to be able to tie together these financial metrics in a way that makes sense to the CFO and the Board.

Our data monetization platform, YDC, ties together these business cases to create a Data Balance Sheet. The platform has an integration to Yahoo! Finance to ingest financial metrics based on the Ticker Symbol (see below).

Figure 1: YDC ingests financial metrics from Yahoo! Finance based on ticker symbol.

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