The other day, a former business associate contacted me about selling his company. Back in the early 1990s, his brand was somewhat of a star in that his studio processing products were used by top artists around the globe to produce their magic hits. In the later part of the decade, we took on his line in Canada but found that sales were few and far between. The challenges were many: Digital recording and software-based processing were gaining so much ground that demand for expensive analog gear slowed to a trickle. Now 20 years later, this fellow seems to believe his company and brand name have value. The truth is, unless he can show a tremendously profitable bottom line and an exciting growth curve, the value will be minimal at best.
So how do you increase the value of a company?
In just about every case, I begin by looking at sales and sales growth potential. Some will argue that operations such as first-class manufacturing, a well-oiled administration or excellent customer service are important—and they are—but without sales, none of that stuff matters. Sales and cash flow are the lifeblood of any organization. Sales generate profits, and investors need to see profits, unless you have some very intriguing technology that has a good chance of becoming profitable over time.
To grow sales, you must first decide on the size of your market and identify your potential client base. Are you getting your fair share? If you are a service business such as a sound company, your sales accounts may be regional or national. If you are a retailer, you may have an education component, along with a storefront and online retail sales. It’s critical that you use social media to bring traffic to your website, and use your website as a marketing tool to share stories about happy customers and explain what makes you different and better than your competition.
The Aha Moment: Creating Demand, by Peter Janis, July 30, 2019
For a distributor importing products, you have to look at what market opportunities are at hand and where the lowest-hanging fruit may be. For instance, another client I have imports wall-mounted TV stands. His primary client base is home AV and he is looking to expand his business for eventual sale. While having lunch at a local restaurant, we counted 15 TVs mounted on the walls, yet he has never gone after the contracting market. So where would he start? The first thing you do is look at your competitors and see if you can find a list of their clients. If a contractor is selling a particular brand of TV wall mounts and you have solutions that the competitor is lacking, you are potentially in the game. If you can make your product just a little easier to manage by adding value or lowering the installation cost while delivering it for the same price, you may win again.
None of this is rocket science, but it does take commitment in terms of time to think through your best options (low-hanging fruit) and a financial dedication to a sales team to do the hard work. The easiest way to get into the game is to hire independent rep firms. Reps bring with them all-important relationships that can, at the very least, get your product into a purchaser’s office. To find reps, look at competitors’ websites to see what product lines are represented. You can approach the rep firms that represent similar or symbiotic products and have them join your team. For instance, a rep firm that sells equipment racks could be a good first line of attack for someone selling TV mounts.
Once your sales team is in place, you will want to create an old-school pin-board map that shows your market penetration. Making your product available in large metropolitan areas (metroplexes) can play a significant role in your success. Think of it this way: If you are an electrician and need wire, you want to be able to buy it locally so you can get back to the job site as soon as possible. People like easy; they will avoid difficult.
If you are a manufacturer and want to expand globally, the approach is similar in that you will want to find a distributor that sells to your target market niche. Distributors, like retailers, need to make a profit. Make sure your pricing policies work. Selling a product to a distributor at U.S. dealer price or selling through Amazon will likely compromise their interest in representing your brand. Distributors and dealers do not want to compete with you.
The Aha Moment: Building Momentum for Your Brand, by Peter Janis, Nov. 5, 2018
It is also important to note that people are busy; a good distributor or sales rep will prioritize their daily activities on products that generate dollars. These folks will invest in a new brand if they see potential, but they will also quickly lose interest if they do not see success. It is up to you as a manufacturer to have all of the tools in place to make their job as easy as possible. This could include, for example, endorsements by influential artists, features and benefits sales sheets, comparative studies, and proper safety checks such as UL, CSA, CE and other electrical requirements. External power supplies, although painful, can shortcut your costs because they can be purchased with approvals already in place.
Once sales are on the upswing, you will want to ensure all of your administrative duties are in place. This includes well-drafted and regular sales reports, complete BOMs (bills of materials) and monthly financial statements that show the company’s true profitability. One more point: The value of a company is directly tied to the opportunity that presents itself in the form of future growth. New product development that can stir excitement is important. This means that you need a well-managed R&D department with a team that is bringing new ideas to life. And as I said in the title, you are either growing or dying … so signs of life are critical!