One question that a potential buyer of a company is sure to ask is: what is the growth potential of this company? No matter how profitable and how well run a business is, a lack of growth prospects will appreciation when selling press hard. So how do you ensure that your company comes across as a growth pearl in the eyes of a buyer? In this article the steps to be taken.

If someone wants to buy your company, that entrepreneur won't because of your blue eyes. The goodwill factor can certainly play a role, but in the end it is about the entrepreneur seeing your company as an opportunity to earn money. And in order to make money, he will first have to recoup the investment of the purchase price. The faster the better.

Financial strength

Suppose your company is a dominant supplier of automation software for architectural and engineering firms – with a market share of roughly 70 percent. That in itself is, of course, a fantastic achievement, for which you are guaranteed to have had to fight hard. Such a large market share means (among other things) that you have market power to set prices. You also have financial strength and therefore also an innovation budget to keep the competition at bay. Profitability shouldn't be a problem. 

For a buyer, these are all pluses. But, as I just mentioned, the buyer won't just ask themselves, "Am I buying a good company?" He will also ask himself: “What is my payback period?” This is where market potential comes into play. If the buyer gets a good feeling that he can double the turnover of your company in a few years, he will be able to recoup his investment much faster than if the turnover remains stable or grows a little. And will he be willing to pay a premium on his purchase price.

Greater market potential

If the buyer doesn't get a sense of a greater market potential – even if it is there, it just hasn't been explored! -, then that will push the price down.

There are several directions you can take to increase the growth potential of your company, or at least put that growth potential in the spotlight.
A very important aspect, experience at No Monkey Business shows, is an aspect that is sometimes overlooked. Sales teams often focus on new, new, new. That is not surprising: sales is an opportunistic profession. Whoever knows how to fish in a new fish usually also fishes a big one right away boost for the turnover. Big haul, quick home.

Additional sales

Less energy is wrongly going towards 'more' sales to existing customers. Once you have sold a product or service to a customer and the service is good, it will usually cost less energy to sell that customer extra. 

Even if it involves smaller amounts and such a way of thinking creates additional complexity in the sales process, incrementally, the focus on the existing customer can bring about very strong revenue growth. At No Monkey Business we say: the closing of the deal is the beginning of the customer relationship.

Three sales techniques

Three techniques are possible: upselling, deep selling and cross-selling. With upselling you sell your customer a more expensive version of the existing product – for example a software package with a premium service contract or a version of the software with more options. Deep selling involves selling more of the same product to the customer. For example, consider adding users to a software package. 

Finally, with cross-selling you offer products that are a relevant addition to the original purchase. For example, in the automation software of just now, this could be an accounting module or an online customer portal.

To other industries

Another way to increase the market potential is to broaden to other so-called verticals – other industries. If you are the market leader in automation software for architectural and engineering firms, can you adapt that product so that it also becomes a good product for other companies that often work with projects. Such as management consultancy firms, IT service providers, and so on. 

The step is obvious, but certainly not easy. If you have a good product and have sold it to a hundred bakers, it is doable to sell it to baker 101. Taking a place in a new one vertical takes time and effort.

Tip: click on this infographic and print it out.

Betting on internationalization

The same goes for the third way to increase market potential, which is internationalization. Suppose you run an online platform for the sale of houses or cars. You are a major player in the Netherlands. It may then be possible to also work with car dealers or brokers abroad, or to force an entry into a market through an acquisition. You can also add a lot of market potential that way.

Increasing market potential, the practice

Now the practice. At No Monkey Business we help with an effective, proven approach.

  • Step one is a baseline measurement: where is your company successful? What is the core of the service, who are your customers, what do you earn the most and the least with?
  • Step two is to organize a workshop, with the theme: based on what you are already good at, what can you add to that? It can be anything, so it's good to let your creativity run wild here! Important questions to raise during this session: do we see opportunities for other products in our current customer base? Can we penetrate new markets with our existing product and with relatively little impact on that product? Can we copy our business operations to other countries, and can we do so – again – with a relatively small impact on the product?
  • Step three is for the reality check and making choices. How big are markets we are interested in? What is the market share we could achieve – given how we are doing in our home market and given the competition in the new market?
  • Step four can an impact analysis be made on the basis of the choices made: what are the expected costs, and what are the expected benefits?
  • Step five is for planning and execution. We always advise our clients to work with a business plan of three to five years. For a potential buyer, not all plans will have to be fully implemented yet. As long as they appear convincing, a positive impact on the valuation of your company is guaranteed. And then you have taken another step towards a dream exit!

No Monkey Business presents a series of 16: the NMB Value increase Top-16.