What’s the Missing Metric in Company Valuations?

The valuation of companies has traditionally been viewed as a binary process, centred on tangible metrics such as revenue, profit margins, and growth potential. However, in a recent poll we conducted, one factor emerged repeatedly among industry professionals: the importance of people.

Having founded and built three businesses myself, I wholeheartedly agree with this sentiment. In the early stages, particularly when raising seed capital, the focus is squarely on the founders. The critical questions are whether they are credible and whether backing them is worth the risk. As businesses grow, the emphasis shifts to the broader team—its ability to innovate, execute, expand, and adapt.

Yet, despite the recognised importance of people, this metric often remains underutilised in formal valuation frameworks. Why is this the case? Several possibilities emerge when we unpack the issue.

One explanation is the inherently intangible nature of assessing individuals or teams. Unlike revenue figures or EBITDA multiples, the capabilities, resilience, and vision of people are not easily reduced to numbers. These qualities often involve subjective judgement, which can introduce variability and bias, making them less appealing to those seeking clear, quantifiable benchmarks.

Additionally, the reliance on binary, numbers-based evaluations may stem from the comfort they provide. Numbers are tangible and ostensibly objective. They offer a sense of precision and predictability that human-centric metrics—however critical—may lack. Investors and analysts are trained to trust what can be measured and verified, which can leave less quantifiable aspects like leadership or team dynamics relegated to the background.

There is also the possibility that assessing people is seen more as a “soft” metric—akin to a feeling rather than a hard fact. This perception risks undervaluing its critical role. A company's success or failure often hinges on the human element, whether it is the founder’s ability to pivot in challenging times, a team’s cohesion in the face of growth pains, or the leadership's vision in navigating uncertainty.

Perhaps the answer lies in developing a hybrid approach—one that marries the measurable with the qualitative. Some attempts to quantify human factors exist, such as tracking staff retention, engagement scores, or innovation output, but these metrics are far from universally adopted. More sophisticated tools could better integrate assessments of leadership, team capability, and adaptability into valuation models.

Ultimately, while the numbers provide the scaffolding of a valuation, it is the people who bring a business to life. Over-relying on binary, quantifiable metrics risks missing the nuance and complexity of what truly drives a company’s success. The challenge for professionals lies in striking a balance—valuing both the tangible and intangible—and in recognising that the human element is not an optional consideration but a foundational one.

This debate is not simply academic; it has real implications for how businesses are funded, scaled, and judged. Perhaps the question we need to ask is not whether people should be a metric, but how we can better account for them in ways that align with the broader frameworks investors and analysts trust.