Entrepreneurs are born with a unique ability to see beyond what is in front of them. The glass isn’t just half full – it’s overflowing with possibilities. For the more practical, conservative people among us, this can be frustrating and exhilarating at the same time. How can someone continue to think out-of-the-box about new ways to grow when they’re in the midst of figuring out what’s in the here and now?
It’s a blessing and a curse, right?
In our experience, we’ve found there is a right and wrong way to grow a business, especially when you’re preparing your business for sale. We get this question so many times: “How do I sell my business?” And our answer often lies in the struggles business owners face in growing their companies, and the way in which they’ve gone about it.
There’s a saying I like to say: “Growing for growth’s sake is like planting weeds in your garden. You’ll get a lot of green, but the weeds choke out your flowers every time.” It’s true.
Maximize business value by starting at the beginnning.
Business Owners start out their businesses with their “one thing” they do best. Many times, it’s a skill the owner has honed in a job, and they turned that experience building a product or delivering a service into their business. They’re good at it, they see an opportunity, and ABC Company is born. As their company builds, they hire their first employee, then their second, and they may even expand to an office or a store front. Their website shines, they begin marketing their firm, and clients start to roll in.
Life is good… And then something strange happens. A lot actually.
Customers start asking for more “things” – a different widget, a new service, more, more, more. Pretty soon, what got you here is not what will get you there. Sure, your company is growing, but are you growing the right way or in the right direction? Are you offering the right products and services to your customers that will benefit them in the long run (and ultimately resonate with buyers)? Are you even attracting the right new customers? And worse, is your messaging, your unique value proposition, getting choked out because you’re offering so many things to a few customers. Rather than one or a few things to a lot of customers.
You see, there’s a science to growing your business and expanding what you do in a measured, calculated way that leads to more profits and better cash flow. Which translates into more business value when you sell your company.
So how do you do this? Here are three areas you should focus on to help you grow your company.
Determine what you should offer your customers – and stick with that
If you’ve owned your own company, you’ve heard this statement before. In answering the question, “How are you going to improve your profits and the value of your company?” an entrepreneur enthusiastically responds, “I’ll make it up in volume!” While it’s a funny sound bite, it’s obviously not the right approach. They key to growing your business is to first understand which products and services you sell (and would like to sell) are the most profitable. This is important. Profitable products and services help you generate growing net profits, especially when you are prudent and careful with your operating expenses. Combine the wisdom of identifying your most profitable products and services with the ones that are the most teachable to your employees (to design, sell and deliver) and the most repeatable (i.e., require the least customization). Once you have that list, you can then ask the question, “Do these products and services deliver what my customers want and need? Do they resonate with my customers so that they’ll repurchase from me and refer my business to my friends and colleagues?”
Use existing information to maximize business value by understanding your market.
The operative word is “research.” It’s no small feat logging into your favorite search engine and learning about your market, your competitors. Think about the answers to these questions and more:
- Looking ahead – What’s coming up on the horizon?
- Competition -What are your competitors doing well, or not so well?
- Trends – What trends are you seeing?
- Room for Improvement – What can you do better?
- Current Strengths – What do you do well?
- Needs – What do your customers need?
- Audience – Who are your customers – the ones you have and ones you’d like to have?
- Expansion – What new markets could you serve?
- Markets – What markets do you currently serve that you could do better?
- Deep-dive into market demographics
A personal note:
Back when I was the CFO for a residential real estate firm, we served the Hispanic community almost exclusively. Our actual company name meant nothing to the community because we served them with a Hispanic DBA and spoke their language. We were very successful, and even in a single city location we have 27,000 Facebook followers. That’s a significant market. But we had blinders on in some respects. There was also an Asian community that bought small homes in the $100k to $130k range that we had not even thought about, let alone tapped. We immediately realized our systems and processes designed to acquire distressed properties, fix them up and sell them could be used to market to the Asian community. A new market was born.
Things to consider when researching demographics:
- Age Groups. Is there a certain age group you currently serve that could expand up or down (say you sell to Millennials – could you sell to High School and College Students or Generation X)?
- Ethnicities. Perhaps you concentrate on a certain ethnic market, and are know for that. Or at least you think you are. Maybe you’re really known for your high quality products, fantastic customer service, durability, dependability, color-schemes, variety of products, and more. Could that translate to another ethnic group?
- Metroplex Locations. Could you open up a virtual office across town, or segment your city into sectors that are more reachable to your customer base? Is it vital that you have an office in certain parts of town or people will not do business with you (“You’re an outsider” if you do not have an office in Tarrant County in Fort Worth. Any further east, and you’re a Dallas-based business, and you’ll have trouble closing any business)
- Surrounding Cities/States. Have you considered opening up offices in other cities, after of course documenting your business processes to scale, including job descriptions, organizational charts, updated projections, website updates, market research, and more?
- Online Markets. It is so much easier know to set up an online storefront on your own website, including eCommerce sites with eBay, Amazon, Walmart and other marketplaces. This immediately expands your market nationally and even internationally, so you really have to have your supply chain optimized to handle the potential surge in demand.
I always say, “Do your lonely time,” which means hole up at a Starbucks, or in your local library or the mall, and spend several hours doing your research. Save your results, document what you find, bookmark competitor websites and market research services. You’ll be glad you did. And you’ll be well on your way to growing your business and the value of your company.