# Industry and Situation Playbooks

## Purpose

Use this reference to adapt the DCF to the company rather than forcing a generic template.

## SaaS and subscription software

Key drivers:

- ARR or revenue base
- new bookings
- retention / churn
- net revenue retention
- ARPU
- customer acquisition cost
- sales efficiency
- gross margin
- R&D and S&M leverage
- stock-based compensation treatment

DCF judgment:

- growth must tie to retention and new business.
- terminal margins should reflect mature software economics, not early-stage burn.
- reinvestment should support growth; do not assume rapid growth with no sales or R&D spend.
- stock-based compensation treatment should be explicit.

## Marketplace / platform

Key drivers:

- GMV or transaction volume
- take rate
- active users / buyers / sellers
- frequency
- incentives and contra-revenue
- fulfillment or payment costs

DCF judgment:

- take-rate expansion should be justified by platform power.
- incentive reduction may hurt growth.
- terminal margins should reflect competitive dynamics and required platform investment.

## Ecommerce / retail / restaurants

Key drivers:

- stores or users
- traffic
- conversion
- basket size
- same-store sales
- gross margin
- fulfillment / occupancy / labor costs
- inventory and payables

DCF judgment:

- working capital and inventory matter.
- margin assumptions must reflect promotions, shipping, shrink, labor, and rent.
- capex should include new locations, maintenance, and technology investment.

## Manufacturing / industrials

Key drivers:

- volume
- price
- utilization
- backlog
- raw materials
- labor
- plant capacity
- capex
- working capital

DCF judgment:

- revenue growth may require capacity expansion.
- margins should reflect utilization and input costs.
- terminal capex should not fall below maintenance needs.
- cyclicality should be considered in terminal assumptions.

## Healthcare services

Key drivers:

- patient volume
- reimbursement rate
- payer mix
- labor costs
- utilization
- regulatory changes
- capex and facility needs

DCF judgment:

- reimbursement and regulation can dominate value.
- labor inflation and capacity constraints should be explicit.
- terminal assumptions should reflect mature reimbursement environment.

## Biotech / life sciences

Key drivers:

- probability of technical and regulatory success
- development milestones
- market size
- launch timing
- pricing
- patent life
- R&D spend

DCF judgment:

- use risk-adjusted DCF when outcomes are binary.
- do not apply a simple mature-company DCF to pre-revenue assets without probability weighting.
- terminal value may be inappropriate if patent life or product life is finite.

## Energy / mining / commodity businesses

Key drivers:

- production volume
- reserves or resource life
- commodity price
- operating cost
- capex
- reclamation / abandonment costs
- taxes and royalties

DCF judgment:

- use asset life and reserve assumptions.
- commodity price decks require source labeling.
- terminal value may be inappropriate for finite-life assets.
- sensitivity to price, volume, and capex is critical.

## Real estate / infrastructure / project finance

Key drivers:

- asset life
- rent / tariff / contracted revenue
- utilization
- operating cost
- maintenance capex
- debt amortization
- residual value

DCF judgment:

- forecast term should match contract or asset life.
- debt sculpting and distributions may matter.
- use project-level cash flows and appropriate discount rate.

## Financial institutions

Key drivers:

- asset growth
- net interest margin
- fee income
- credit losses
- operating efficiency
- regulatory capital
- ROE
- payout ratio

DCF judgment:

- avoid standard FCFF enterprise-value DCF unless explicitly justified.
- use DDM, FCFE, or excess-return logic.
- cost of equity is often more relevant than WACC.
- book value and ROE cross-checks matter.

## Distressed / turnaround

Key drivers:

- liquidity
- maturities
- covenant headroom
- restructuring costs
- asset sales
- stabilization timeline
- refinancing feasibility

DCF judgment:

- model the path to survival before valuing the steady state.
- downside case should test liquidity.
- terminal value should not assume recovery without funding.
- valuation bridge should capture debt-like claims and restructuring obligations.