How “selling” your customers can help you sell your business
When selling your business knowledge is key to achieving a successful transaction for all parties. For many business buyers, expanding their customer base is a primary acquisition objective. Whether they acquire a close competitor or a company in a different market sector, most buyers hope that expanded revenues from new customers will justify the cost of their merger and/or acquisition transaction.
If you want to get top dollar for your company, you need to assess — and effectively market — your customer assets to potential buyers. A serious buyer will want to know that your customer base will help it increase penetration in its own market or break into new ones.
Hunger for new faces
In a 2015 KPMG survey, 35 percent of respondents said their primary reason for participating in a merger would be to expand their geographic reach or their customer base. To drill down to a specific sector, the National Association for Printing Leadership (the commercial printing industry’s trade association) surveyed its members in 2014, asking what they planned to achieve through M&A deals. Three-quarters cited “expand our business and client base,” and most (52 percent) said they wanted to participate in mergers “to diversify our client base.”
It’s easy to understand why companies are attracted to the idea of buying new customers. Building a customer base is hard and long work, requiring businesses to make major investments in sales staff to initiate relationships and customer service divisions to maintain them. Acquiring a new, possibly lucrative customer base in a single purchase seems a lot easier.
Know your buyer
Although it’s possible to market your customer base to buyers in general, it’s easier to sell your businesses customers to a particular buyer whose objectives are known. If you have one serious suitor, determine whether it views your business, and customer base, as a strategic acquisition that can provide it with growth opportunities, or whether it’s looking to buy assets as inexpensively as possible. Doing so will help you understand the buyer’s plans for your customer list and the premium it’s willing to pay for it.
To get a better idea of the value a potential buyer might place on your customers, look closely at:
- The condition of its client list. Has the company steadily grown its client base and revenues, or have these numbers plateaued recently? If the buyer shares your market sector, is your company responsible for luring customers away?
- The nature of its clients. Does the buyer have a diverse client base in terms of number, geography and type of income? Or is the company overly reliant on a handful of key customers?
- Its strategic plans. Does the buyer want to sell new products that don’t interest its current customers? If it’s domiciled overseas, is it looking for a foothold in the United States? Has it attempted to expand its customer base in the past and failed?
Making it work
Once you know what a buyer is looking for, you can tailor your presentation to its needs — for example, an international company that wants to make a savvy geographic move. In this case, you could emphasize your long-term relationships with U.S. customers who might otherwise be wary of buying foreign goods.
Also consider how your products and services can help a buyer grow its current customer base. If your buyer wants to rejuvenate customer relationships with products that complement its own, highlight those products and explain how seamlessly they can be incorporated into the company’s current lineup.
Expansion dreams
Business buyers want their acquisitions to provide good value for money. To make your company as appealing as possible, learn about a buyer’s client expansion dreams and make the case that your company can help them come true.
The bests advice we can offer is, “Don’t go it alone.” Contact Ciuni & Panichi, Inc. Chairman Charles Ciuni, CPA, CVA, to get sound business advice at 216-831-7171 or cciuni@cp-advisors.com.
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