Selling Your Business: Your Value Proposition

Why would someone buy your company?  The real answer is that it is cheaper and faster for them to buy your company than to recreate your business themselves.  The challenge for you in selling your business for high multiples is to convince them of this.

If you can convince them, the stage is set for a successful at a higher valuation.  For the owner of a mid-sized company, the difference can be millions of dollars. If you can’t convince them, then you may be like many business owners who leave millions on the table when they sell. This is simply because they don’t understand how much importance buyers place on concepts like “Value Proposition.”

Your Value Proposition can protect you from competition – and that is why people would want to buy your company.  For example, the Value Proposition for most Swiss watches years ago was usually a variant of “we make the most accurate watches.”  Then along came quartz watches that were more accurate than the mechanical Swiss watches. Because of this,many Swiss watch companies went out of business. Companies like Rolex that survived did it by changing their Value Proposition to something more emotional – “Wearing a Rolex tells other people something about you.”

Definition of a Value Proposition

A Value Proposition can be for your entire company, a product range or for each product or service:

It is a promise that you give to your target customers to convince them to prefer you over your competition. Your value proposition is actually a statement that shows relevancy on how your product or service is able to solve the problems or improve the situation of your customers. It also shows the value and specific benefits that they can enjoy. Most importantly, it tells your target customers the reasons why they should prefer you over your competition which is known as the “point of difference.”

The Value Proposition, then, is not really about your products or services, but about how they produce a highly valued outcome for your customer.  If you can articulate this, your business is automatically elevated above the masses of companies that fail to articulate it and are forced to compete with each other with commoditized offerings.

Importance of Value Proposition

Is it really necessary to have a value proposition when selling your business? Yes. This is simply because customers care more about themselves than about your products or services.  The essence is to focus on outcomes, not products or services.  At work, for example, we do not offer “business exit services.” Rather, we “take the stress out of selling your business for high multiples.”  Taking the stress out is very important to customers -- not our understanding of law, business or marketing.  Notice, too, that the language of our Value Proposition is the customers’ language, not ours. That’s because we interviewed people outside the office to find out what was important to them; then, gave it back to them in their own words, not in MBA-speak.

These days, a Value Proposition is likely to be a sentence or headline embodying the benefit you offer, with a second sentence or sub-headline giving a more specific explanation of what you sell or do – and why it is useful to your customer. The best ones are followed with a good visual that sums it all up.

Example of a Good Value Proposition

Branding experts are at the moment enamoured with the Value Proposition of Evernote, an internet service that lets you save anything you find on the internet to a cloud-based account:

Evernote

Remember Everything

Evernote apps and products make modern life manageable, 
by letting you easily collect and find everything that matters.

Here the first sentence or headline embodies the benefit offered (you can “remember everything“), whilst the second sentence or sub-headline gives a more specific explanation of what they sell (“apps and products“) and why it is useful to you as a customer (“makes life more manageable by letting you easily collect and find everything that matters“).  It is then followed with a good visual – the head of an elephant to remind you that an elephant never forget.

Conclusion

Articulating a good Value Proposition serves as powerful persuasion for a buyer of your business to offer you high multiples on sale.  It is worth getting it right before you go to market.

 


Ben Killerby

Owner at Saxon Klein

Corporate Advisor and Legal Counsel for Saxon Klein, a corporate advisory firm in Melbourne.

Saxon Klein

Finance, insurance and banking services


Questions

Anonymous asks

Comments

User
Loading...