What Makes You Money
understanding what - where - who - how
This is the most important component of your business strategy — making money. Without sales, and the prospect of continued and growing sales, you have nothing.
The marketing prep analyzes your marketing position. It is important that you clearly define your marketing strategy and competitive position to prospective buyers. That is what they will be buying.
Reviewing Your Current Market Positioning
Your first step in preparing your company for sale is to define your current markets. This must be clearly stated when presenting your company to a prospective buyer.
Your prospective buyer will be interested in the following:
- Business Category:
distribution manufacturing wholesale retail or other
- What is your Standard Industrial
Classification Code (SIC):
find your business SIC-NAICS codes
- Who is your primary market target?
business (define type) consumer (define demographic)
- What is the approximate number
how many of these customers account for 80% of revenues?
- Where is your customer base?
local regional national global
- How would you rate the trend of
growth stable decline
Usually not required, but often requested, is a clear definition of your company's SWOT analysis:
you need to clearly define your company's strengths. It could be your product line, sales force, location, operation efficiency or other.
in comparison, you need to outline your company weakness. This too may by your product line, sales force, location, operation efficiency or other.
the buyer would like to know what opportunities lie ahead under a strategic play. This could be a key reason why the buyer is interested in your business.
Strategic opportunities may include a product line expansion, opening a new market, streamlining an operation for better efficiency, etc.
in contrast, you need to also list the potential threats. This may include price competition, new competition from a major player, lack of employment skills, declining demand, etc.
Segmenting the Components of Your Marketing Strategy
The buyer needs to understand your marketing strategy and how it is executed.
- Who is your target market? Who buys your particular products and/or services and why?
This is very important. The buyer may want to move into a new marketing segment. Your experience with this kind of strategic play is very valuable.
- The buyer would like to understand your customer base. What is the approximate number of customers that you serve and how many of them account for 80% of the revenues?
- The buyer will ask whether your customers are loyal. Do you have repeat sales from your customer base?
- Where is your customer base: local, regional, national, or global? Are there any potential customer base opportunities outside of your current marketing reach?
- What parameters do you use to segment your market? It is not always asked, but can you complete a financial segment analysis to determine the profitability of each segment?
Products and/or Service
- The buyer needs to understand your current product or service offering. A history of your product or service development
will be requested.
- Questions on potential product
line extensions will be raised? For example,
a plumbing business buyer may want to expand their
service line to include bathroom remodeling.
The buyer would like to understand your experience (success or failures) that you have in product line extensions and development.
- How do you price your product or service? Price is a relative term. But could you raise your price and maintain your market position? Or is price subject to intense competitive pressures that force you to offer discounts and other incentives?
- A follow-up question is whether you have cyclical and/or seasonal factors that impact your price and revenues?
The buyer would like to know your promotional activities. Which of these promotional campaigns are successful? Which of them were failures and why:
radio television internet newspapers billboards
- Direct Marketing:
direct mail telemarketing search engines
- Direct Sales:
sales staff outside representatives trade shows, conferences
- Public Relations:
PR campaigns media alliances
customer referral other
Finally, how do you distribute your products or services? List the distribution channels that you maintain:
|do you maintain a warehouse, order facilities unit, etc.|
|do you maintain a retail operation in a strategic location?|
|do you deliver your service?|
|do you maintain an e-business fulfillment operation?|
Analyze Your Competitive Position
They may request that you list your competition along with the strengths and weaknesses of each competitor:
- if you are operating in an emerging market, you may have few competitors. But fast growing markets invite in new players with new capital that can challenge your dominant position.
- if you are operating in stable markets, you may have many competitors who hold a strategic position in the market. It is unlikely to see new competition; but it is possible for mergers and acquisitions that may give a competitor added strength and depth.
The Buyer Will Discuss Your Competitive Defense
- define the barriers of entry into your market — how easy or how difficult is it from someone entering your market to compete?
- define the the barriers of exit — can a competitor exit the business fairly easy or are the barriers so high that an attack on a competitor may force retaliation in price or other?
- what competitive threats do you find from players in the value chain — can your supplier or buyer move down or up the value chain to compete directly?
- what gives you an competitive advantage — is it your retail location, target location, product offering, or what?