Comprehensive Prompt for Integrating Narratives and Numbers in Business Valuation

Below is a carefully designed prompt that you can use when seeking to develop a valuation that properly integrates qualitative storytelling with quantitative analysis. Feel free to customize specific sections to fit your particular company or situation.

Integrated Business Valuation Prompt

I need a comprehensive business valuation for [COMPANY NAME] that effectively integrates both narrative elements and numerical analysis. Please develop this valuation following these structured guidelines:

Part 1: Company Narrative Assessment

1. Business Model Story: Describe the fundamental story of how this company creates and captures value. What problem does it solve? Who are its customers? What is its unique positioning?

2. Market Context: Analyze the total addressable market, its growth trajectory, and how much of this market the company could realistically capture. Include both quantitative market sizing and qualitative trends affecting market evolution.

3. Competitive Positioning: Evaluate the company's competitive advantages or moats, and how sustainable these advantages appear to be over time. Identify key competitors and their relative strengths/weaknesses.

4. Growth Narrative: Articulate the most plausible story for how this company will grow, including geographic expansion, product development, market share gains, or new market entries.

5. Life Cycle Assessment: Determine where this company sits in its corporate life cycle (startup, growth, maturity, or decline) and how this positioning should impact our valuation approach.

Part 2: Numerical Framework

1. Historical Performance Analysis: Provide key metrics from the past 3-5 years, including:

   • Revenue growth rates
   • Gross and operating margins
   • Return on invested capital
   • Cash flow conversion
   • Key operational KPIs specific to this industry

2. Forward Projections: Develop 5-10 year projections that directly connect to the narrative elements from Part 1:

   • Revenue growth (justified by market size and share assumptions)
   • Margin evolution (linked to competitive positioning narrative)
   • Capital requirements (connected to the business model story)
   • Terminal value assumptions (aligned with life cycle assessment)

3. Risk Quantification: Translate qualitative risk factors into appropriate numerical adjustments:

   • Discount rate determination
   • Probability-weighted scenarios
   • Sensitivity analysis on key assumptions

Part 3: Narrative-Number Integration

1. Assumption Mapping: Create a clear table that maps each major numerical assumption to its narrative justification. For each key input, explain:

   • What part of the story drives this number
   • What evidence supports this assumption
   • What risks could alter this assumption

2. Scenario Analysis: Develop at least three scenarios (base, upside, downside) that represent coherent alternative narratives, with corresponding numerical projections for each.

3. Valuation Range: Rather than a single point estimate, provide a valuation range that reflects narrative uncertainty, with:

   • Probabilistic distribution of outcomes
   • Key inflection points that would shift the valuation significantly
   • Comparison to market/competitor valuations with explanation of differences

Part 4: Critical Assessment

1. Story Plausibility Test: Evaluate whether the narrative passes the tests of being possible, plausible, and probable. Identify the weakest links in the story.

2. Numerical Consistency Check: Assess whether the numbers are internally consistent and align with economic reality (e.g., do they assume implausible market shares or margins?).

3. Feedback Loop Considerations: Identify what new information would most significantly change this valuation, and what metrics should be monitored to validate or refute the core narrative.

Deliverables

1. An executive summary that captures both the narrative and the resulting valuation range
2. A detailed valuation model with clearly documented assumptions
3. A presentation that visually communicates how the story and numbers reinforce each other
4. A monitoring framework for tracking how new information should update this valuation over time

Please ensure all assumptions are transparent, well-reasoned, and connected to both industry benchmarks and the specific circumstances of this company. The final valuation should be defensible both qualitatively and quantitatively.

Would you like me to customize this prompt further for any specific type of company or valuation context?