Data Economics

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

Making Data Monetization a Boardroom Imperative: Mapping to Enterprise Value

Sunil Soares

CEO, YourDataConnect

yourdataconnect.com

I have been involved in many data management projects. The #1 challenge in most data management projects is driving business adoption. The key issue with adoption is mapping data management initiatives to quantifiable business benefits.

We just announced our latest release of YourDataConnect, which includes an Enterprise Value feature. This feature maps Enterprise Value to quantifiable business cases across the organization. Bear with me as we wade into “finance-speak,” but, honestly, data monetization involves alignment between data management and finance.

In the graphic, the Equity Market Value of the company is $31.64B, and Long Term Debt is $10B. As a result, Enterprise Value (EV) is $41.64B, which is the sum of Equity Market Value and Long Term Debt.

Earnings Before Interest Tax Depreciation and Amortization (EBITDA) is $1.7B, which implies an EV/EBITDA multiple of 24. EV/EBITDA is a metric used by private equity to abstract the capital structure from a company’s valuation; it is somewhat similar to a Price Earnings Ratio.

Finally, the Enterprise Value to Free Cash Flow multiple is 36.

As shown in the bottom-right corner of the figure, Data Monetization Business Cases have four broad categories: Balance Sheet Reduction, Reduce Costs, Grow Revenues, and Manage Risk. All these business cases are normalized in terms of Enterprise Value.

For example, the Improve Material Data Quality business case is based on receiving Purchase Orders faster, which reduces net working capital, which improves Free Cash Flow. YourDataConnect integrates with third-party data quality tools and shows a reduction in Net Working Capital of $150,000. Given the 36x multiple, $150,000 in incremental Free Cash Flow results in $5.4M in incremental Enterprise Value.

YourDataConnect sums all the business cases to an Aggregate Enterprise Value of $46M. The platform summarizes the results on a monthly or quarterly basis.

In a future blog, I will discuss the emerging role of Data Monetizer, which needs skills across data management, technology, and finance.

Check out www.yourdataconnect.com for more information.

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