Know Your Business to Improve Saleability
As a business leader, you hope your company will be profitable and achieve incremental growth. You have a good feel for the level of profit your company is going to deliver over the next 12 to 18 months but the value you have in the business usually becomes a key focus when you are thinking of selling or raising investment to scale up.
However, what is not generally known is that approximately a third of businesses put up for sale or investment never get a serious offer, and of the remaining two thirds, only half the sales go on to complete. So, how do you improve saleability of your business and guarantee your sale?
To build value in a business is hard and with the current economic volatility, it is even tougher – yet many people still manage to create exceptional and saleable businesses. Yes, preparation is critical, timing is vital, reducing risk is essential and engaging with the right advisors and buyers is key – but these top tips for sale preparation have already been covered extensively.
We believe there is one secret that simply is not covered but sits centre stage to business saleability – great everyday business, that is, putting your customers first, not in the clichéd way often expressed by executives but by having their interests deeply embedded into your business model at every stage. Do not ask what you can gain, but how you can help the right customers and thereby improve saleability.
A recent PWC survey found that 73% of consumers place customer experience as an important factor in their purchasing decisions and that 86% of buyers would pay more for a better customer experience. Putting the customer first can pay ‘dividends’ and improve saleability and business value.
If customers seek your business out in a ‘we want we need motivation’, margins are higher as the cost per acquisition reduces in both marketing and sales, and retention and referrals increase. So, the secret to establishing more valuable companies beyond the usual preparation for sale is to identify a niche you can own, where the competition is not focusing and where customer demographics are growing – in short, placing your business ahead of customer demand and then looking after your customers well. Revenue, margins, and saleability will follow.
The approach of customer-first is not new, neither is it ground-breaking, but it is highly effective as a means of enhancing the value of a business. It can, however, only be achieved by leaders who take the time to really understand what it means with the help of data and research, yet so many leaders fail to invest the time required for this analysis. The approach is not to ‘polish’ your customer service but to go much deeper in the analysis, and then build the business model around the results. Key questions might include:
- What is the demographic trend in your customer base?
- Which customers waste your time and cost you money – and how do you get to ‘no’ more quickly with them?
- How much profit is at stake if you lose the right customers?
- Why are you better?
Failing to understand and deliver what your customers value, out of history, habit or misconception is a classic drain on the value of your business and a sign that leaders are caught in the zeitgeist of complexity and ignoring the basics. Purchasers will place higher multiples and price-earnings on businesses with strong client retention, where employees create greater results for customers more cost-effectively and where a company’s reputation places them ahead of the competition.
Contact Avondale Corporate
If you are looking to create a more valuable company or looking for advice on pre-sale preparation and how to improve saleability, Avondale runs a Value Builder programme. We can help you better understand your value drivers and “scale-up” options pre-sale or earlier. For an exploratory discussion without obligation, please contact us on +44 (0)1737 240888, or email us at email@example.com for further information.
Further Resources on How to Improve Saleability
Watch our on demand “How to Improve Saleability of Your Business” webinar below to learn the key influencers that will make your business more valuable on exit and how to build these into your planning. Hosted by Avondale Chairman Kevin Uphill and Director of Strategy Stewart Millington, the topics discussed include multiple influencers, focus on value building, brand value, vendor due diligence and much more.
Also, read our “Cost Reduction: Maintain Profits and Create a Lean Business” article here to learn how to review your cost base and spot ‘layer cake’, where to focus to save time and money and how to best tackle rising costs to maintain profits, run a lean business and improve saleability through challenging times.