What’s your company’s most important number? Top-line sales, of course. That’s the first thing that strategic and financial buyers look at when evaluating investment opportunities. What sales are, what they’ve been, and what they can be in the future. Your company’s sales and marketing efforts are essential to your ability to produce revenue dependably.
These efforts are driven not only by your sales and marketing plan but also by your branding, customer diversification, customer satisfaction, product differentiation, quality of competition, and market size. When all these facets are managed well, you’ll achieve a strong valuation when you consider a sale.
Potential acquirers will always look at the sales and marketing objectives for your company. These objectives make it clear to potential acquirers that you are focused on the continued growth of your business. Management should lay out all objectives in a clear action plan that will power your team to achieve their goals. The sales and marketing objectives should include revenue goals based on historical and market information to ensure they are obtainable. These efforts should produce revenues in a proven and systematic way that ensures your business is sustainable and not dependent on the efforts and skills of one employee. Also, hold everyone accountable to make sure they are working toward their goals and meeting the company’s sales and marketing objectives. A solid sales and marketing plan is a sign to investors that projections for growth can be met. It also allows for a simplified transition for new employees and managers.
Your brand is how your customers identify your company. It demonstrates to an acquirer why your customers choose you over the competition. A brand that effectively communicates your company’s mission and resonates with your customer base is key to greater sales. Brands influence customer choices and attract new customers.[1] A recognizable brand reinforces your company’s presence and strength in the marketplace. Protecting your brand, including logos and trademarks, is all part of building your company’s worth. Your intellectual property in the brand is valuable. If you haven’t officially registered your trademarks and filed appropriate patents, you’re setting yourself up for a loss when a sale takes place, because an acquirer will find it hard to give you a premium on your business. If you don’t have a documented brand strategy with all the legalities taken care of, start creating one today.
Customer diversification is top of mind for any potential investor. “Don’t put all your eggs in one basket” sounds cliché, but clichés are usually true. Your company’s well-diversified customer base that generates strong sales makes an investor feel confident that growth is sustainable. Investors are often leery of customers that represent an oversized portion of revenues. The threshold varies, but you generally want to shoot for a customer base that has no more than 10 percent of revenues coming from any one customer. Acquirers want to feel confident that the loss of one customer won’t have a significant impact on the business.
Acquirers are interested in businesses that provide products or services that customers come to depend on and that build repeat business. And the bedrock for repeat business is customer satisfaction. Your sales team’s goals and objectives should focus on customer happiness. You can use surveys, interviews, and follow-up mailers to probe customers for feelings on service, quality, missed expectations, and disappointments. Surveys enable management to understand customer pain points and resolve them in private without damaging the company’s brand. Customer appreciation events build strong relationships as they put you in close contact with your customers to discover new ways to provide goods or services to them.
Acquirers often like companies that have the competitive advantage of a unique product or service. Be prepared to demonstrate what sets you apart from the competition. What makes your product unique? If it’s product design, make sure to show how that design provides the marketplace a better option and why customers prefer your product. Be sure to track sales compared to your competitors. Your pricing strategy could be another way to set your business apart. If your product provides cost savings to your customer, document this and keep apprised of all the market forces that affect cost so you can make adjustments quickly. Acquirers look to you to articulate and quantify what makes your company the best choice in the marketplace. Knowing exactly what gives your products the edge will make a big difference in your company’s value.
Your sales and marketing team has worked hard to grow your company within the market, but investors will want to see how much more they can grow the business. Document how large the market is that your company can grow into and your path to maximize yourself as a marketplace leader. Identifying growth opportunities through new products, services, and geographies is an essential factor in selling your company.
Identify which new geographies make sense for you to enter with your product or service. Also examine common trends in your industry. Research and explore how you can move outside of this target market and what barriers exist to becoming a market leader. Review other markets or industries that can use your product with little repurposing on your part. Explore additional tangential products your company can produce that will fill customers’ needs.
Stay up to date on competitors and new entrants into your market and document how you have a competitive advantage over them. Put systems in place to continually identify the size of your market and any new technology advancements that can improve your profitability. Also, research your company’s market niche by product or service line. Investors prefer businesses to have all their processes well documented to allow for any management changes.
As you prepare to sell your business, it’s important to remember that documentation is key to getting the best offer. The documentation portfolio should consist of:
Whether strategic or financial, each acquirer will scrutinize these items before making an offer for your business. Completing this portfolio will maximize the value of your company when you aim to sell it.
[1] "Proving the Value of the Brand," The Forbes Marketing Accountability Initiative powered by MASB.
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