A Study of 14,000 Businesses Reveals How Not to Spend Your Time

by | Feb 10, 2021

Blog
Articles

A Study of 14,000 Businesses Reveals How Not to Spend Your Time

by | Feb 10, 2021

You’ve heard that you need to be “close to the customer,” but data shows that founders should actually keep their distance in order to maximize the value of their company.

As a business owner, how personally involved should you be in the sales process?

For many, getting out there, being seen and heard by customers builds relationships that can build traction, growth, and profitability.

Your business has no more passionate advocate than you- given that it’s yours, after all. As the owner of the business, you’ve built up a wide network of connections and gathered substantial industry knowledge.

Perhaps you choose to spend more time selling because you’re a natural. You enjoy engaging with people on a more personal level and finding ways to help solve their problems with your company’s products and services. Operational tasks aren’t your thing, and you prefer to delegate to others on your team.

If you’re looking to build value in your business, a different approach may be necessary. Companies that are less reliant on their owner for generating revenue have a greater appeal to potential acquirers. If your goal is to transition or sell your company in the future, you should not be the top salesperson. You may be surprised to know that to build more value, your customers should not know you personally.

In a study by Value Builder™, over 14,000 business owners were surveyed to learn more about this dynamic. Owners were asked whether they’d received offers for their business within 12-months preceding the study, and to share what multiple of pre-tax profit the offer represented.

The offers were compared to responses 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, isolating just the 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 huge 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.

For more on the actions to take so as to build your company’s value, have a look at these ten powerful resolutions.

Build Your Company’s Value With A Value Builder™ Certified Advisor

As you shift focus from complete involvement in the running of your business, you’ll get to free yourself up to capitalize on new opportunities that come your way. All while resting assured that your business is developing to a point where it can stand well enough on its own.

The most valuable companies can operate without their owner’s everyday involvement. Start now to set the foundation for future transition.

Book a complimentary strategy call with Laurie Barkman, Certified Value Builder Advisor, and embark on the journey to gain more freedom and control over your future.

You will benefit by:

  • Receiving your company’s Value Builder™ Score
  • Discovering the eight strategies that drive the value of your company
  • Learning how to differentiate yourself using the same methodology used by Warren Buffet
  • Learning about the strengths and weaknesses of your business from an acquirer’s perspective

Connect with us

Ready To Take the Next Step?

We’ll guide you through the process. Schedule an initial call today.

Sign Up For SmallDotBig Updates

Get updates on insights, events & more

More Blog Articles

Ready To Take the Next Step?

We'll guide you through the process. Schedule an initial call today.