Business Sale Readiness Factor #9: Sales and marketing
Whether you’re looking to sell your business or not, the chances are that as a business owner, you want to make more sales and make greater profits. There will be a few business owners out there who might be comfortable with their existing level of sales and profits, but they tend to be in the minority!
When I read Information Memorandums regarding businesses being marketed for sale by other advisors, I tend to see the same ‘growth opportunities’ listed out for each and every one. It’s like a cut and paste job, with basic initiatives being listed, such as increasing salesmen, widening product/service ranges, opening new offices and increasing marketing campaign budgets. My first thoughts are always: if it’s that easy, why haven’t the owners already done it themselves and bagged the profits?
If you want your business to be “sale ready,” you need to drive home some of these initiatives yourself; don’t leave money on the table for the buyer. In particular, the following are areas in which businesses tend to differentiate themselves in this regard:
1. Having a strong brand and reputation
Some businesses sell themselves simply through their strong brand and reputation. As a result, they stand out in their marketplace and attract off-market approaches from admiring prospective buyers. Or, if the business is taken to market, there will naturally be plenty of competitive tension to help encourage top-end prices.
How highly valued is your brand and reputation?
It tends to be difficult to measure this yourself due to conscious or subconscious bias, so it may be worth undertaking an external survey to gather some independent views and act upon these accordingly.
2. Knowing your sustainable competitive advantage and leveraging success from it
What is it that you do better than your competitors and that customers really value?
This is what should drive your whole business, and what you should be protecting from others. When advising clients, we call this their “sustainable competitive advantage” (SCA). We work through an exercise with our clients to identify their SCA and then work out a plan to maximise the benefits this brings.
3. Following an effective clearly defined sales and marketing plan
The key with any sales and marketing plan is to keep it fluid and responsive to results.
For that reason, when we’re working with clients on their sales and marketing plan, we focus on keeping it action orientated. That means condensing it down to a 90-day 1-page plan, with clear strategies, actions, responsibilities and timeframes.
The plan needs to be visually available for the team, and regularly followed up, holding everyone accountable. Then it’s a case of discerning what has worked and what hasn’t. Next, we develop a new 90-day plan.
We call this rolling process “plan, do, check, act.”
4. Knowing your profit margin by product/service and aligning strategy to this
I referred to this in my blog Business Sale Readiness Factor #2: Profit Maximisation. Plenty of businesses grow their top-line turnover without this translating to a proportionate increase in their bottom-line profit. Why is that?
It’s often a sign that the business owners don’t understand the profit margins on their products or services. Without this knowledge, they’re drawn to selling the easiest products/services to sell rather than the ones which deliver the greatest profits.
A buyer of your business will need to know your profit margins by products/services so they can devise a strategy to maximise the return on their investment. In turn, it also gives you the ammunition you may need to justify paying you a higher price for your business.
5. Having an effective database of customers and a strong pipeline of new work
A decent Customer Relationship Management system (often referred to as a CRM system) is a must if you’re looking to drive up sales.
Software like Salesforce or Microsoft Dynamics 365 will do a lot of the heavy lifting for you by managing customer data, providing actionable insights and often linking straight into things like social media.
However, like any system, it can be “garbage in, garbage out,” and often it leads to the net being spread too far and wide. We encourage clients to identify their “zebra” customers. Apologies in advance for any vegetarians out there, but the analogy is that a zebra, as opposed to, say, a warthog, will feed a pack of lions and keep them satisfied for a decent length of time. On that basis, although it’s difficult to catch a zebra, if the lions work together as a team then the pay-off will be significant.
The same applies to your customers. Who is it you’re really looking for that will make a big difference to your sales? What do they look like? Where do they hang out? How can you “catch” them?
6. Having a high level of repeat sales from your customer base
I mentioned in Business Sale Readiness Factor #1: Key Attractions that buyers don’t like uncertainty. They particularly don’t like uncertainty over future sales. So, the more you can demonstrate the loyalty of your customer base, the more attractive it will be. Ideally, this will be underpinned by contracts or framework agreements, but for many industries, this aspiration may be unrealistic.
Moreover, if you’re currently only selling once to your customers, you’re missing a massive opportunity. It’s much easier to sell to someone you’ve already sold to before (assuming you didn’t mess up the first time, of course).
It’s time to think about what other products or services you could sell to them, and how you can reach out to them, to grow your sales.
The above key factor is taken from our free and insightful ‘Sale Readiness’ diagnostic tool which aims to give business owners a score on the nine key factors determining:
- How attractive your business is for sale;
- Whether you will maximise the final business sale value; and
- The efficiency and smoothness of your business sale process.
The online tool takes only five minutes to complete and your results will highlight the top three factors which are working well and the top three factors which require the most attention before you consider a business sale process. You will also be able to see how you compare to the global benchmark (average scores of all completed diagnostics) on each of the nine factors.
Of course, if it would be helpful, my team and I would be pleased to discuss your results and guide you on your next steps.
In addition, you can read all nine of my monthly blogs, each discussing a different business sale readiness factor, on the Larking Gowen website.
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