Bump up the value: Secrets that can fetch biggest price for you business

The Economic Times 9th Feb 2013

Here are some secrets that can fetch you the biggest price for the smallest slice.

Dream Team

The ideal management consists of people who have been part of successful mega-deals, have depth in your industry, and worked together as a team. Sadly, there's no such group. But some get close. Tap them.

Board Seats

Ensure a majority of board consists of outsiders. Try and attract some well-known luminaries without cash, and build on their reputations to benefit your own valuation.

Clever Affiliations

Part of the concept in both Dream Team and Board Seats is to build value by affiliation. The concept can be extended to contract, outsourcing, and joint venture deals.

Solve a Problem

Whatever the product or service you offer, it must solve some human problem that is not solved better elsewhere.

Know Your Rivals

To prove that your solution is the best, you must also expose the failings of the competitive solutions available in market.

Spiffy Testimonials

If you have customers, showcase them. It helps to put a face on real-world problems solved for real people.

Intellectual Property

To maximise valuation, you need to anchor down the intellectual property — via patents, trade secrets, and noncompete clauses.

Wide and Deep

Investors want to see a whole family of products for today and beyond. But they also want each product to be robust. So, focus on your best product.

Be Honest

Unlike selling a second-hand car, a company's valuation is best maximised with honest disclosures.

Financial Stuff

When you do your projections, go out 5 years, then cut it back to 3 and compare them. If the three-year projection is almost as good, just show the three years, otherwise five.

Deal Structure

Depending on your goals, sometimes deal structure can be traded off against a higher valuation. Properly done, both sides can stand to benefit, and the valuation zooms.

Business Plan

There is no one standard outline for a business plan. Each has to be tailored to the qualities of each company. Have a plan with all the key information.

(Source: harvardcapital.com)

Choosing the right customer is not a luxury. It is a requirement!....Bal Palekar.....Marketing Guru

A professor of operations recently told me; "You marketing people said that a customer is the king and the center piece of any business. Would you therefore advise a business to accept and serve any customer that chooses to come along?". I realized he had me there ! If strategy is about making choices, one of the most important choices you need to make in marketing is the very reason for you to be in the market - what type of customer you will serve. By making this choice, you also automatically choose its implication - what type of customer you will not serve.

FROM LOSS TO PROFIT

I know of a B2B service company which went from making losses to making profits. One of the main cornerstones of their turnaround strategy was clear guidelines about what type of customers will the company go after and what type of customers it will not waste time on. I know this case intimately and just this bit made a huge difference. Within a time of mere two months the atmosphere in the company turned positive when the whole organization began realizing what a difference this choice made to the morale of the business development people and operations people.

Counter intuitive - sometimes throwing out the customers you do not want, improves business results. The CEO of a company said recently "I used to see red when a certain client was on the phone. The client made us jump through the hoops and fire unnecessarily and tired us completely. We were doing more work for her business than what we did for the other top 4 clients of ours put together. It was not easy but I decided to sack the client". And what do you think happened ? The morale and productivity of employees went up, its service level to its good customers improved and they responded by giving more work to the company.

WHO IS THE "RIGHT CUSTOMER"?

The lesson is not to fire bad customers but to choose the right customers in the first place. So who is the right customer?

First and foremost, the right customer is the one to whom your uniqueness and competency can make a big difference - in a way that your competitors cannot. The fundamental truth hidden in this statement is that intrinsically there is no wrong or right customers - they become so only when you know your own competencies. The wrong ones are the customers to whom your uniqueness does not make much difference.

If you are designed to create high quality products and if your sales department recklessly brings in more customers who do not value quality but only price, you will find yourself inundated with frustrated business development people pressuring you for more discounts, irate cost accountants asking you how you will meet profit targets, customers nagging you for price and delaying your payments. All because you went after wrong customers.

In fact, your choice of customers is a very important part of your strategy because ultimately a business can practice only that strategy which its customers permit it to. A company cannot be in search of better quality if its customers are in search of lower price - it is an unstable situation.

While choosing your customers make sure they are

(a) not too small (less than 5% of your existing sale) : small customers increase the cost of serving them

(b) not too large ( not more than 25% of your existing sale) because big clients cause havoc if they leave and cause an unbearable shock . If they stay they behave as if they have bought your body and soul

(c) not unprofitable : sometimes big clients ask for discounts and credits and rework - such that in the end they may contribute to the revenue but not much to the profit

(d) not obsolete and heading towards sunset themselves : if your clients are from industries which are in long term decline - or which are becoming non-remunerative due to hyper competition - your own long term prospects are suspect

(e) the ones that will make you expert in the area you have chosen for your future - they will help you gain the right competencies, help you along your selected path and accelerate your progress on the path you have envisioned for yourself.

10 questions to ask when choosing a location for your store

10 questions to ask when choosing A LOCATION FOR YOUR STORE

SME Buzz - Economic Times - 6th December 2010

1.Visibility—Do you need a visible storefront like a shoe store or dry cleaner?
2.Traffic—Is the location a high or low traffic area?
3.Is your target market there?
4.Is the location in a growing or decaying part of town? What about local crime levels? 5.Condition of the property — will it need any repairs now or in the near future? Can you expand if necessary?
6.How healthy is the local business climate?
7.Are there other ‘draws’ nearby that will help attract your customers? Compatible businesses like a pizza parlour next to a video store would help you grow too.
8.Are there any zoning restrictions set by authorities?
9.Are the rental costs affordable or will you be paying an unrealistic premium?
10.Last but not least…how close are your competitors from you? How do they compare in appearance to your business? Do they look more or less prosperous? What is your strategy to counter competition?