B2B Sales Trends

Key B2B Sales and Marketing Trends for 2016

At the end of each year, my team and I publish a report on the major B2B sales and marketing trends. The idea is not to show how smart we are but rather to provide ideas you can start using immediately to grow your business. Feel free to download the full report.

Trend 1 – Importance of Digital Reputation. B2B prospects spend lots of time searching online before engaging with a potential vendor and if the experience isn’t right, they will leave quickly. On the internal website side, you should have a website that is clean, professional and easily navigable. Externally, you need to find every site that a potential purchaser could use to learn about you or your business category, and make sure your presence there leaves a good impression.

Trend 2 – Lead-to-Revenue Drives Marketing and Sales Alignment. While there are several flavors of L2R, our best practice model consists of five strategic steps that are designed to create a framework for B2B business growth.

  1. Define your business strategy
  2. Develop the processes that will facilitate your strategic goals
  3. Implement the technology infrastructure to optimize your processes
  4. Execute on the processes defined in Step 2
  5. Monitor, refine and improve results

Trend 3 – Rise of Marketing Technology.  According to a 2015 survey by Forrester Research and AdRoll, while 80 percent of B2B marketers consider marketing technology comprehension and use it as a core requirement of their job, just 17 percent of respondents self-identify as leading in marketing technology maturity.

Trend 4 – Customer Experience Goes Mainstream. Prospects will do everything they can to find out about you before reaching out and engaging with your sales team. Good B2B marketing and sales is not just about how you communicate to the prospect, but also how easy you make it for prospects to find you and conduct business.

Trend 5 – Video Everywhere. Major players are placing huge focus in this area. While YouTube remains the dominant player in the video ad market, Facebook has launched a number of video features to challenge YouTube. Twitter is also seeking to take advantage of the growing video market with the launch of its video autoplay feature. And Google, not to be outdone, is promoting its video ads inside search engine results pages (SERP).

Trend 6 – Growth of Predictive Analytics. Predictive intelligence/analytics has been a hot topic because of increased user adoption. This type of technology can benefit B2B companies in a number of ways:

  • Predict the likelihood of specific prospects/customers to behave in specific ways
  • Provide recommendations to target specific market segments
  • Combine external and internal data to fill informational gaps
  • Identify issues, discover new opportunities and measure KPIs

Wishing you a happy and prosperous 2016.

Note: this post was originally posted at www.GreatB2BMarketing.com.

Micro Business

How to Value an Existing Lifestyle or Micro Business

When it comes to buying a business, size does matters. Most lifestyle or micro businesses have under 1 million in annual sales. When it comes to lifestyle and micro businesses, the owner is also the top manager.

For valuation purposes, a good rule of thumb for a marketable lifestyle or micro business is that the owner should generally earn about 10 to 20% of the gross sales. Therefore, a lifestyle or micro business that does $400k in revenue should have an owner that earns between $40k to $80k per year from owning and working in the business.

…owner should generally earn about 10 to 20% of the gross sales

Often when the million dollar gross sales per year threshold is eclipsed, the owner’s income drops to 10% or less. This drop is mostly due to the need to increase management, which leads to thinner margins, and higher inventory or carrying costs.

In summary, the important issue for you as a buyer is how much can I expect to earn?  When it comes to lifestyle and micro businesses where the owner is responsible for managing employees, taking care of customers, and other day-to-day activities, the owner likely views bookkeeping as a low priority. If anything, he relies on compiled financial reports and is far less inclined to use these reports to run their business. Therefore any financial records provided by the seller may be less accurate and require more due diligence on the part of the buyer.

From the prospective of an accountant or a banker, the value of a business is purely based on historical financial statements, which can be an incomplete view of a company’s real value.  Other factors that drive the value of a business is its location, equipment, inventory, employees, patents, existing customer base, industry, vendor supplier relations, completion, and what you plan to do with the business after a sale. Therefore, you cannot rely on your accountant or banker to define a quantitative value of a business you are looking to buy.

Other value drivers aside, another rule of thumb is that businesses often sell for a little more than two times discretionary earnings. To understand discretionary earnings, you must first understand that a small business is an economic entity that provides a product or service that customers buy in sufficient quantities to allow the owner to pay all costs and operating expenses, including the owner’s salary. Let’s say that water represents revenue and a bucket represents the volume of all non-discretionary costs and operating expenses such as rent, employ salary (including a fair wage for the owner), marketing, insurance utilities, etc. The lip of the bucket represents the breaking even point of discretionary income. The water or revenue that overflows the bucket is considered discretionary income.

…businesses often sell for a little more than two times discretionary earnings

Let me be clear– discretionary income is not yet profit since the surplus revenue can be used in a variety of ways. The owner can use the surplus to buy more inventory, increase his promotional expenses, pay off debt, or pay himself more money. It is the discretionary income that is most often used to value a business.

According to a business broker’s friend, with over 15-year experience selling businesses, the average selling price for lifestyle and micro business was 2.3 times the business’s discretionary earnings.

Do you know how to value a lifestyle or micro business?

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Entrepreneur or Not – You Need to Read This

If you are a corporate wage earner — as I was for much of my working life — you may decline to read this post because of the term “entrepreneur” in the title. However, I assure you that, regardless of how you make your living, it does have relevance and can provide food for thought.

I had the pleasure of attending a 90-minute talk by Gary Schoeniger on the topic of Redefining Entrepreneurship. Gary knows his stuff as the founder of the Entrepreneurial Leadership Institute (ELI) and co-author of one of the best-ever business books: Who Owns the Ice House: Eight Life Lessons from an Unlikely Entrepreneur. ELI is doing some amazing things in teaching the lessons of the Ice House to students and would-be entrepreneurs. Here are a few of the actionable and fascinating notes from Schoeniger’s presentation:

  1. According to Gallup, only 13% of employees are actively engaged, 24% are actively disengaged and 63% are disengaged. Scary stuff, but it gets worse – on the education front, while 76% of elementary students are engaged, the numbers drop to 61% for middle school and 41% for high school students.
  2. Employers are demanding an entrepreneurial workforce, but there is a large disconnect between what schools are teaching and what entrepreneurs are actually doing.  For an interesting take on this, view the Ken Robinson TED talk titled Do schools kill creativity? Robinson’s talk is profound, funny and worth a listen.
  3. While much of the college-level teaching about startups is focused on the “outliers” like Jobs, Gates and Zuckerberg, such entrepreneurs are a tiny fraction of new businesses. This has the effect of creating unrealistic expectation and discouraging students who would otherwise be successful business owners.
  4. Universities primarily teach management and “delivery” skills but entrepreneurship is more about “discovery” skills. A key entrepreneurial attribute is the ability to identify a problem and craft a solution by utilizing inquiry, creativity, curiosity, observation, networking and collaboration. In other words, an entrepreneur is a detective that is searching for the right signals amongst all the noise.
  5. Google’s head of people operations, Laszlo Bock, announced that the company no longer looks at an applicant’s GPA or where they went to school as hiring criteria. According to Bock, “College can be an “artificial environment” that conditions for one type of thinking. IQ is less valuable than learning on the fly.” This is the essence of the entrepreneurial spirt.
  6. Despite the common myths, most Inc. 500 companies had these characteristics:
  • Start as “ugly babies” where success is by no means apparent
  • No breakthrough technologies
  • Not venture funded (only .018 of all companies are VC backed)
  • Little formal planning, backed up with ad-hoc research
  • Start with average of $10K from friends and family
  • No identifiable educational or personality type of founder(s)

In addition to the search and discovery skills mentioned above, here is what makes for a great entrepreneur:

  • Put themselves out there, creating “tactical serendipity”
  • Self-directed – don’t wait for others to tell them what to do
  • Ability to delay gratification
  • Know how to transform adversity into advantage
  • Persistent and resilient

I will leave you with two final thoughts. First, the world is full of opportunities if you are willing to be a startup detective and find solutions to existing problems. Second, if your career choice finds you working for a company, non-profit or government entity, that’s great, but you and your organization can still benefit greatly from the lessons taught by Gary Schoeniger and other inspirational business leaders.

Note: this post originally appeared at www.GreatB2BMarketing.com 12-10-2015.

Lean and Young – Business Planning for Millennials

businessmen planning meetingAccording to a brand new post from entrepreneur.com, if you’re twenty-something, there are seven things that you should know about business planning before you end up climbing the corporate ladder for 40 years.

Now, don’t get me wrong: I like this article. It focuses on the new business models that have sprung up in response to what Gartner calls, The Nexus of Forces:

“The Nexus of Forces — the convergence of mobile, social, cloud and information — has become the platform for digital business. Digital business is the creation of new business designs by blurring the digital and physical worlds.”

It can be argued that today, every business is a digital business and that, based on the rules of bimodal and agile business planning; your old-school business plan may be totally irrelevant. So, before I spin off into a number of fascinating rants, let me get back to the article and clarify where CBM can help you remain agile, but still rooted in good business modeling practices.

Take One Ibuprofen and Call Me in the Morning

The first thing the writer or the article, Cameron Benson, did was to grab a meme from Big Pharma:  “Go for the ‘minimum effective dose.’” By this he means just get to market, already.

”As long as your product offers value to your customers, it’s ready to launch. Everything else will come in due time. This doesn’t mean you should start a business around a subpar or incomplete product, but you shouldn’t wait until it’s perfect, either.”

I agree. But I also believe that if you haven’t thought through your delivery methods, how you can reach your customer and who your competitors are, you’re destined to have jumped too soon. Use tools like the business planning framework. It’s lean enough to not gum up the works but smart enough to help you avoid the most common pratfalls before you launch.

Our friend Cam also asserts that “People are your businessAs an entrepreneur, you need to nurture your ability to develop and cultivate relationships with others because that skill is essential to the growth and success of your business. How can you build more relationships to help your business grow?”

About twelve  years ago, I read Tim Sanders book, Love is the Killer App. I was deep into my corporate phase (meaning I had stopped being an agency person and had gone in-house to try to effect awesome marketing/PR change from within) and there were some long-time political lifers invested in stopping every idea that wasn’t their own. I nearly lost my mojo—until Tim Sanders and his statistics about nice people finishing first saved me from developing premature meanness and the frown lines that go with them.

This Yahoo executive laid it out in a way that I could definitely work with: “Here, then, is my definition of love business: the act of intelligently and sensibly sharing your intangibles with your bizpartners. What are your intangibles? They are our knowledge, our network, and our compassion. These are the keys to true bizlove.”

Sanders is basically saying that “smart, nice people can succeed.” If your personal brand is mean and narcissistic, you can have the best product in the world but your brand will tank because in this age of social media transparency and comment sections, you’re toast if you offend too many people too much of the time. Trust me—you do NOT have the budget to kill every rumor—especially if they’re true. Suffice it to say, newer business models have to include some semblance of kindness in their plan. It’s just common sense.

Cameron also counsels: “Let go of the business plan myth. The world has changed a lot since the time of traditional 160-page business plans. There are millions of successful businesses that started from a simple idea…while the “traditional” business plan may not be necessary, there are key things to consider before you launch. First, start with the end in mind by considering how you want your business to function. Next, consider the branding aspect of your business, domains, social media profiles, etc. and own your name! Finally, put it all together by handling the legal aspects of your business.”

At CBM, we love this attitude. Creating a Lean Business plan will often take care of the functional blueprints you’ll need for day-to-day operations. But don’t forget—one of the main reasons businesses fail is because they can’t get a handle on logistics. Once again, our Framework can help.  If I could tell any young entrepreneur one thing, it would be this—“lean in” on your logistics. It’ll pay off in the end.