Understanding your market

It was great to hear from one of my clients the other day that they had just had their best three months’ turnover ever.

We have been working together for some months on marketing and sales.  Prior to that, his efforts in this direction had been sporadic and lacked any coherent targeting or message.

After analysing what was different and better about his service and what his target market looked like we started to build a marketing strategy.  The strategy sets out what message he needs to get to which prospects and in what ways (such as email marketing, events and so on).  With my guidance, he has built and implemented a simple marketing activity plan that he can follow to make this marketing happen.

The results speak for themselves.

Here are some points to consider:

What is your market?

-          Your market is a subset of all the prospects who might conceivably purchase from you

-          These prospects have a number of attributes in common

-          These attributes mean that you are in some way able to achieve superior margins when selling to these prospects

-          This is often called your market niche, or market sector

-          You may have a number of different markets for different products

What common attributes constitute a market?

-          Pains or desires – the need to feed a growing family on a budget, the need to reduce the costs of IT in a growing business, the desire to flaunt wealth

-          Geography – Acacia Avenue or Slough or Berkshire or the UK or the World

-          Size – number of employees, or waist measurement

-          Industry – also known as a vertical

-          Income – for consumer sales (or turnover for B2B)

-          Attitude – early adopter, or risk averse, or conservative, or thrill seekers

-          Age – for consumer sales or age of business for B2B sales

-          Event – divorce, retirement, birthday, acquisition, recruitment – also known as market triggers

-          Existing products – BMW owners, or oil-fired boiler owners, or Linux users

Why should you target a specific market niche?

-          A tight definition of your market niche allows you to focus your marketing efforts

-          A tight definition of the need allows you to develop a compelling proposition

-          A better fit between your proposition and the need makes you a specialist, differentiates you and increases margins

-          Focus on a particular niche makes you more memorable and allows you to develop a reputation (or brand) more quickly

 

Preparing for Exit

Would you know how to handle a sudden and unexpected call to ask if you would be interested in selling your business? This is exactly what happened to a technology reseller who had not considered this before and had no idea what his business might be worth. Although interested now, he was very nervous about meeting a potential purchaser and his advisors. Nonetheless he felt he should at least explore the possibility. He was also anxious not to be led into selling too cheaply or being 'turned over'.

The client asked me for help, so we produced a preliminary valuation, I was briefed and prepped for the meeting and attended it with him. After the meeting I advised on the strategic and commercial shortcomings of the buyer's position and the likely impact on his final offer. I guided the client through the process of how to prepare for exit in his own time, and for the best sale price. I carried out an internal due diligence for the client which identified areas of weakness and opportunities for any possible future sale. We then developed an action plan for the client to use to address these matters.

As a result the client was positioned to sell on his own terms at a time of his choosing and to achieve full value for many years’ of hard work. An important lesson learnt!

There are several other motives for selling your business: perhaps wanting a lifestyle change; the business is outgrowing you; the business needs further investment to grow or you simply want to bank the value created.

Whatever your reason, you should begin by conducting a thorough review of your business as if you were the potential buyer.  To get the best price you need to get into shape.  The best-run businesses are always fit for sale but the value of your business is whatever a buyer thinks it is worth.  However, the things that make the business profitable and manageable for the current owner also make it attractive to potential buyers: solid strategic positioning, good management processes, managed risks and strong cash flows.

Seek out and minimise inherent risks: for example, over-reliance on a few customers, suppliers or even employees; no formal contracts; or potential litigation.  You should look at the value of the business in terms of future strategy rather than past numbers.  Generate competition, look outside your industry and be ready to control the timing of any eventual sale.

Getting the best price for your business is a strategic, marketing and sales exercise.  Your business must be growing, profitable, well-managed and measurable, in an attractive market sector and delivering cash first, and well-marketed and positioned for sale second.  You should also prepare, position and market your business so that the price you receive reflects the motives of the buyer.