“Build from what the customer wants to buy, not what you do well.”
“Always work backwards from where you want to be, not forward to where you want to go.”
“Successfully sell your offering before it is finalized – when it’s just barely useful – and get customer feedback.”
“You are in the relationship business. Build what customers think is worth having. The product is merely the method to build marketable relationships with customers.”
Marketing words of wisdom from serial entrepreneur Tony Grass, currently founder & President of a new kind of service that help clients find customers worth having – e-Market Intelligence – at last evening’s NYTECH event on “Long-Range Planning for the Successful Sale of a Company.”
Excellent insights were also provided by moderator, Paul Ellis, principal of the Paul Ellis Law Group, and co-founder of NYTECH, and his knowledgeable panelists, all focused on today’s new new exit environment and the importance of building towards an exit from the company’s early days in order to assure a smooth process when the time comes.
What factors build value in the last couple of years before exit? The two most important:
• Reputation, credentials, brand – the brand will be worth 30% of the exit value.
• Recurring revenue – based on distribution for product sales and on recurring need for services from delivering a unique bottom line advantage to B2B customers, “enjoyable value” to B2C customers.
I was especially struck by just how different today’s exit environment has become.
- The traditional discounted cash flow (DCF) value is not that useful anymore because of accelerated change. Today a lot of value derives from possibilities a company’s assets can lead to in time – the future use potential.
- Even the traditional structured auction is no longer typical because the same technology has different uses and values for different buyers. It’s all about the individual value proposition.
And because the environment is getting more and more complex, professional advisors have grown enormously in importance – investments bankers familiar with complexities of a company’s industry as well as accountants and attorneys specialized in specific areas of relevance. (Say goodbye to your husband’s best friend who’s a generalist lawyer!)
To begin at the beginning today means knowing the end game from the outset. As the Cheshire cat said to Alice, where you want to go depends a good deal on where you want to get to. If you don’t know where you’re going, it doesn’t matter which way you go.