Strategy and Leadership Podcast McKinsey Partner Tim Koller on Mastering Business Valuation
11 snips
May 27, 2025 
Tim Koller, a McKinsey Partner and co-author of "Valuation," dives into the nuances of business valuation. He explains the delicate balance between revenue growth and profitability and critiques short-term cost-cutting measures that can jeopardize long-term success. Koller highlights the CEO's pivotal role in resource allocation and the importance of using a structured capital investment framework. He also discusses how future leaders must adapt to technological advancements while developing a solid grasp of valuation drivers, all to enhance decision-making.
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Revenue Growth And Return On Capital
- Value is driven by revenue growth and return on capital, which together determine cash flow.
- Balance growth and return on capital rather than optimizing only one metric.
Avoid Short-Term Cost-Cutting Reliance
- Avoid relying on cost cuts as the primary way to raise profits long term.
- Stop cutting where it will harm customers because those cuts will eventually reduce revenues.
When Margin Targets Kill Growth
- Koller describes a company that forced uniform margin targets and blocked higher-return growth opportunities.
- Another firm starved a unit of investment until it grew far below market, then spun it out.
