For investors
Takuven answers the three pricing questions a deal depends on: how much profit the target leaks today, how much better pricing could add, and whether the prices behind the earnings would hold if tested. All three are measurable, and all three belong in the price of the deal.
The single most important decision in evaluating a business is pricing power.
Warren Buffett, 2010 interview with the Financial Crisis Inquiry Commission
Two products, one for each moment of the investment: the decision, and the holding period.
Pricing Value Diligence
The product for the investment decision: the Leak, the Upside and the Power, quantified in one committee-ready report, inside your deal clock.
See the product →Profit Recovery
The product for the holding period: budgets versus actual giveaways across countries, customers, products and sales reps, a number on every deviation, and an owner on every fix.
See the worked case →Buy, hold, exit
Buy
Pricing Value Diligence before you commit: three quantified answers, one Defensible EBITDA Bridge.
Hold
Pricing is the most powerful and fastest EBITDA lever a holding period has. Profit Recovery puts a number on the deviation from policy, gets the sales team on board, and captures the margin, portfolio company by portfolio company.
Exit
Pricing before divestiture: capture the leak twelve to eighteen months ahead of the sale, so the improvement sits in the numbers the buyer prices, not in the story the seller tells.
Pricing power, in one paragraph
A company has pricing power when it can raise or defend its prices without losing customers. It is the most direct evidence that customers value the product more than the price, and the best predictor that today’s margins survive tomorrow. Profit without pricing power can disappear at the next negotiation. Profit with pricing power comes back next year. That difference belongs in the price of every deal, and it rarely is.
Investors have always known this
If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.
Warren Buffett, 2010 interview with the Financial Crisis Inquiry Commission
There are actually businesses, that you will find a few times in a lifetime, where any manager could raise the return enormously just by raising prices, and yet they haven’t done it.
Charlie Munger, USC Business School, 1994
Buyers look for unused pricing power. Sellers should capture it before they sell. Takuven finds it and puts a number on it.
Who this serves
Private equity
The full cycle: diligence at entry, margin capture through the hold, pricing before exit.
Family offices
Direct investments held for the long term, where pricing power decides whether returns compound.
Venture and growth investors
A pricing power read on growth-stage companies: can this company monetize what it builds, and does its go-to-market discipline protect the price?
Bring a live deal
Bring a live target, or a portfolio company, to a 45-minute conversation.