A study of 14,000 businesses reveals how you should not be spending your time.
In an analysis of more than 14,000 businesses,
a new study finds the most valuable companies take a some what different approach to the
business owner doing the selling. So who does the selling
in your business?
My guess is that when you’re personally involved in doing the selling, your business is a whole lot more profitable than the months when you leave the selling to others.
That makes sense because
you’re likely the most passionate advocate for your business. You have the most
industry knowledge and the widest network of industry connections.
If your goal is to
maximize your company’s profit at all costs, you may have come to the
conclusion that you should spend most of your time out of the office selling,
and leave the dirty work of operating your businesses to your underlings.
However, if your goal
is to build a valuable company—one you can sell down the road—
....you can’t be your company’s number one salesperson.
In fact, the less you know your customers personally, the more valuable your business. Now isn't that interesting?
....you can’t be your company’s number one salesperson.
In fact, the less you know your customers personally, the more valuable your business. Now isn't that interesting?
The Proof: A Study of 14,000 Businesses
Sellability Score just finished
analyzed our pool of their users for the quarter ending December
31. We offer The Sellability Score
questionnaire as the first of twelve steps in The Value Builder System, a
statistically proven methodology for increasing the value of a business. (Click Here for your Score)
We asked 14,000
business owners if they had received an offer to buy their business in the last
12 months, and if so, what multiple of their pre-tax profit the offer
represented. We then compared the offer made to the
following question:
Which of the
following best describes your personal relationship with your company's
customers?
- I know each of my customers by first name and they expect that I personally get involved when they buy from my company.
- I know most of my customers by first name and they usually want to deal with me rather than one of my employees.
- I know some of my customers by first name and a few of them prefer to deal with me rather than one of my employees.
- I don’t know my customers personally and rarely get involved in serving an individual customer.
2.93 vs. 4.49 Times
The average offer
received among all of the businesses we analyzed was 3.7 times pre-tax profit.
However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.
However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.
Companies where the
founder knows each of his/her customers by first name get discounted, earning
offers of just 2.93 times pre-tax profit.
When Value Is the Enemy of Profit
Who you get to do the
selling in your company is just one of many examples where the actions you take
to build a valuable company are different than what you do to maximize your
profit.
If all you wanted was a fat bottom line, you likely wouldn't invest in upgrading your website or spend much time thinking about the squishy business of company culture.
If all you wanted was a fat bottom line, you likely wouldn't invest in upgrading your website or spend much time thinking about the squishy business of company culture.
How much money you
make each year is important, but how you earn that profit will have a greater
impact on the value of your company in the long run.
How Healthy is Your Business? Take the Business Health Check and Find Out TAKE TEST
How Healthy is Your Business? Take the Business Health Check and Find Out TAKE TEST
