Growth strategies are an important component of selling any business. This post shares specific growth strategies that can help expand your business, get more buyers interested in making offers and ultimately receive a higher valuation for your business.
One of the best ways to get any buyer excited about purchasing your company is to share your ideas for growth opportunities within your business. Of course, the question often arises, if the ideas are so great, then why didn’t you implement them on your own?
There are hundreds of reasons why business owners don’t execute on growth plans. They are comfortable with the business as it now exists, the capital involved would be heavy, or perhaps the time and energy involved with implementing the growth plan was just too much for the business owner as they approach retirement.
Whatever the reason, we find that most of our clients know ways that would enhance the growth prospects of the business. We also know that buyers like to hear about these in their due diligence process.
To that end, we have included some of the areas that you might consider for growing your business. Of course this is not an exhaustive list, and there may be other ways to expand your business that you could share with a buyer. The point here is that you need to include a section that provides a narrative of the top strategies that a new owner could grow the business from where it stands today.
Before we begin, keep in mind that the best time to add any growth initiative to your business is when your business is already on solid ground and operating at a high-level. Launching new growth strategies when the company is fighting to strengthen it’s core offering is the worst possible time, and could actually do more harm than good. Hopefully, some of the methods below will help you think about the growth plans that you would recommend to the new owner of your business.
1. Products / Services
When properly executed, creating new products or services in your business can build some terrific competitive advantages for your business. Having multiple offerings in your business is another way to reduce risk, and the process of new product development can go a long way in employee morale and building brand loyalty within your customer base.
One of the first strategies that we recommend looking into in order to broaden or strengthen your product mix is by offering a premium version of your core product or service. Think about what other items that you could offer to your existing customers that would get them to pay a higher price for a better version of what they already buy from you.
Some companies get 4 to 10 times the amount of their core offerings by building out more value-added products or services. Offering these premium versions to existing customers and adding an up-sell component to your sales process could lead to higher profits for the business. Up-sells can also increase customer loyalty, and selling items to existing customers is the best way to grow without increasing customer acquisition costs.
Think about your existing offerings and how you could develop complimentary products or services. What other extensions to your services can you offer customers?
2. Geographical Expansion
Many businesses are perfectly suited for growth, but they have reached the maximum potential of their existing geographical market share. Perhaps your business could benefit the new owner by expanding into new geographic locations. It is important to present as much context as possible around these expansion opportunities.
One of our clients had a lot of existing customers requesting that they open another location in a market about 50 miles away. The vendors for this business were also quoted as saying that the opportunity for a new location in this market was incredible. These facts helped a buyer get excited about the prospects of expanding into this market. We have also seen sellers list the ideal demographics of the market that they feel would support an additional location for the business.
We see a lot of business owners that have “blinders on.” They are very comfortable with their success, and the thought of opening another branch or satellite office sounds exhausting. Expanding into new markets is one of the most underutilized strategies for growth, and it makes sense to present this option to the potential buyer.
3. Customer Segments
Some owners fail to properly attack a new customer segment, and this could create an enormous opportunity for a new buyer. For instance, we recently worked with a business that had no outside sales force. They generated all of their revenue through websites where potential customers called in and talked to an internal service representative about their services. Most of their competitors called on a variety of business leads and had their own salespeople. Ultimately, a buyer with a strong sales background bought the business after seeing the opportunity to build stronger relationships with professional salespeople out in the field.
Think about the growth opportunities that come with adding new customer segments to your client mix. The prospects that come with these new segments could be helpful when it comes to motivate the perfect buyer for your business.
4. People
Often times it can be the addition of key people to an organization that can make all of the difference to the future growth plans. If your business could benefit from a key manager or a better sales force, then this is the place where you want to include a description of these roles within your company.
A buyer will likely look for your input when it comes to the types of positions that need to be filled in order to hit key growth targets in the business, so it is important to think this through. Is there a position in your business that you just never got around to filling that could improve the business?
5. Technology
Many of the business owners that we talk with have at least one area of their business where an improvement in technology could benefit their future growth prospects. Helping a new buyer get their arms around these growth opportunities is always helpful.
One of our clients spent years creating a state-of-the-art operating system, and listed licensing this technology to competitors and other specialty trades as a potential growth opportunity. The buyer that they chose to go with was impressed with the thought of this concept, and the idea helped him get that much closer to saying “yes” to the deal.
Think about every part of your business, and ask yourself what areas could technology help my company grow?
6. Strategic Partnerships
Good strategic partnerships can come in many forms. One of the most common strategic partner is another business. When done correctly, striking an agreement with another business can lead to more sales for both parties involved. So, what industries could you send referrals to, and how could they be enticed to reciprocate?
A consulting client of ours owns a large business that is in the construction management industry. They have their finger on the pulse of development opportunities within the cities where they maintain operations. They have forged some excellent strategic partnerships with architectural firms. Our client gets them involved in new projects, and the architectural firms bring them into projects that they’re involved with. It creates a perfect win-win situation.
What industries, or better yet specific companies, are in your marketplace that a new buyer could build stronger relationships with?