When you sell your company, the acquirer will look to understand your position in the market and it could impact valuation
As we’ve posted in many blogs, it’s more than just your financials that a future potential acquirer will consider when placing a valuation on your company. Another non-financial factor they will look to understand is where in the market(s) you serve are you positioned? Where your company is positioned may excite the acquirer or it might concern them as it pertains to where they could take your business in the future.
What is a market position? It’s managing the 4 P’s (Product, Price, Place, Promotion). How your team manages each of these will ultimately position your company in the minds of your customers and you’re looking to have this perception be one that differentiates you from your competition in a positive way.
Here are questions to facilitate your thinking and to discuss with your team:
- Are we intentional about where we position ourselves in our market(s)? (i.e.: are we positioned in the low, mid or high end of our market as it pertains to the 4 P’s)?
- Are we confident that our target customer’s perception of where we are positioned in the market aligns with what we want that position to be? Or as an example do we view our position as serving the high end of the market but the customer perceives us to be in the lower tier of the market in terms of capability or offering or quality, etc?
- Does our market position appear that we are trying to be all things to all customers, or are we managing our market position to serve a target group of customers?
- Every industry and market is separated in to 3 segments; Good, Better and Best product and service offerings – where in your market(s) is your company positioned? And do you know which of these 3 is growing, flat or shrinking and could your future business be impacted by this shift? (i.e.: during good economic times, the Better and Best segments might be growing versus the Good and in down economic times, Best may decline as the buyer/consumer looks to save money moving to the Better or Good.)
Don’t let the market position your company for you. If this occurs then you have to hope it’s being positioned in a positive light. Be intentional about how you and your team manage the 4 P’s so you position your company exactly in the market where you believe it will best stand apart from the competition. Doing so today will pay you great dividends at time of a future exit in the eyes of an acquirer.
