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What Does Your Company Really Do?

Are you providing a product or service, or are you providing a benefit to a customer? A new way to think about value--and get the most for your company.

What’s sounds better to a potential customer: “Our widgets are made from very strong polycarbonate,” or, “Because our polycarbonate widgets break down less frequently, each one saves you twenty dollars over the industry leader.”  When you put it like that - to someone who is in need of widgets - the product practically sells itself!

As a business owner, I expect you already know that.  You can’t successfully sell your widgets (or widget-services, if you sell a service rather than a product) unless you know how to market them and how to best present them to a potential customer.  As Brian Tracy has said so eloquently, a salesperson doesn’t really sell a product - she sells the benefits that the product brings to a buyer.

This principle also holds true for selling your company.  If you say, “We have four plants in the tri-state area,” a potential buyer will shrug and think, “So what?  Why do I care?” It is exponentially more effective to frame your facts in such a way that the buyer can clearly see the value you would bring them.  For example, you could say, “Because we have located our four plants at strategic points throughout the tri-state area, we have access to every major highway and, unlike our competitors, we can ship to customers in 17 major cities with just 24 hours’ notice.”

Here’s another example: I worked with a company owner who proudly proclaimed, “In 2011, we began selling in retail stores and revenues increased by 18.3%.”  That’s nice, but it doesn’t explain why that fact is so important.  How about, “Aside from 2008, revenue has grown year-over-year from 2002 to 2012.  While our sales have historically been the result of direct marketing efforts, in 2011 we developed strong relationships with two of the three largest retailers in the industry, which will continue to drive sales forward far more quickly than in the past.”

When in the sales process does this become most relevant? Usually, there are two main documents created during the process of selling your company: a teaser and a confidential information memorandum, or CIM.  If you sell your company yourself, you’ll write them; if you hire a business broker or an investment bank, they’ll do it for you.

After you’ve pulled together a carefully selected list of buyers, you send out the teaser. That’s a one- or two-page blind summary designed to give a prospective buyer a quick overview of what you do, your industry, your business plan, and your earnings and revenues.  Interested buyers will sign the appropriate nondisclosure agreements in order to receive the CIM, a 20- or 30-page document that includes enough information for a buyer to respond with a letter of intent.

Of course, any buyer is going to be interested in nitty-gritty details as well.  When you mention your four manufacturing plants, a prospective buyer will want to know if you own the property, what it’s worth, what your mortgage payment is, and how that debt impacts your EBITDA.  But you’ll never even get to have a discussion of the financials if you can’t articulate a benefit to the buyer up front.

This way of thinking isn’t limited to the process of selling your company.  It’s also a valuable tool for crafting your business plan.  Why are you starting a new product line?  Why are you expanding your web site to accommodate international customers?  If you’re considering a particular change, but you can’t articulate the benefits that it would bring your company, it might not be the best course of action.

When you reframe your company’s purpose not as providing a particular product, but rather as providing a certain set of benefits to your customers, it can transform the way you do business - not only when it comes time to sell your company, but also for the business choices you make every day.

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Last updated: Nov 9, 2012

DAVID LONSDALE | President, Allegiance Capital

David Lonsdale built and sold three venture-funded companies before becoming president and co-owner of Allegiance Capital in 2005, which provides M&A financial services to middle market business owners.




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