Process Mistakes that Reduce Busines Value During a Sale

Between the time when a business owner puts his company on the market and the closing date, there are two events that can occur which either kill the deal outright or negatively affect the final sale – the inadvertent disclosure of the sale and the accidental disclosure of proprietary information to competitors and customers.

The most common is the inadvertent disclosure of the impending sale. When the sale is unexpected and word leaks out in an uncontrolled manner, it has the very real potential to sink the deal in a variety of ways. For one, when employees discover that the company is for sale, they wonder what else they don’t know and become concerned that they may be on a sinking ship. They may put out feelers and begin to look at other employment options. As key employees leave, the value of the business is negatively affected. The entire sale may die if enough people leave. Moreover, employees that feel blindsided may lose respect for the company and management, affecting their performance even if they stay.

The inadvertent disclosure of the sale may also cause customers to question the reason why the owner is selling. They may begin to look for alternatives, fearing that unwelcome changes may occur after the sale. Competitors can use the news of the sale to pirate your best customers and employees. Even your suppliers may start selling to your competitors because they are uneasy about the future.

In addition to the inadvertent disclosure of the sale and all the negative things that snowball out of it, sometimes during the due diligence process the seller will discloses proprietary information to competitors and customers. Generally, the potential buyer is covered by a confidentiality agreement. However, the due diligence process performed by the buyer sometimes creates enough confusion that proprietary information is mistakenly disclosed. Someone somewhere makes the incorrect assumption that what they are discussing isn’t consider proprietary and word leaks out. Once the bullet has left the gun, there is no getting it back.

How will you protect your business value against inadvertent disclosures?

Follow us on Twitter @SteveImke

Note: This post originally appeared April 6, 2016 at SteveBizBlog.com

 

Showcase Your Expertise – Increase Your Market Value

Meg Rye, head of Design Recruitment at Facebook in the U.K., posted the following letter on LinkedIn. The letter was written by Mick Jagger to request that Andy Warhol design the cover artwork for the album Sticky Fingers. In addition to the fact that the subject matter is very cool, the communication has a number of important lessons for today’s marketing and sales professional – or any occupation, for that matter. It is a great illustration of how your market value is determined not by what you do, but instead by the differences in the way you do what you do it, and the value the market places on those differences.

How many of us have wished for a client to say, “Take as much time as you need and charge me whatever you want, just please do this work for me.” But remember that it is not the actual value of what you deliver that establishes your market value – it’s the perceived value. In the case of Andy Warhol, the perceived value to Jagger was huge. There were thousands of designers who would have done the album cover artwork for Jagger at a fraction of the cost (or even at no cost to get the portfolio bragging rights), but only one who was told to name his own price.

In every industry, there are tiers of providers, ranging from the highest-priced and highly differentiated  to the lowest-priced and least differentiated. The latter are what we call “commodity suppliers” and are almost always selling based primarily on price.

For example, in my own industry, there are various categories of B2B marketing and sales providers/outsourcers. There are some who gain clients only because they are the least expensive, and most of the time, they are not as effective – definitely not what I would consider experts. At the other end of the spectrum are extremely high-priced consultants, who, with a few exceptions, are not necessarily more skillful than many of those who charge much less. In this case, the client is paying for the perception, not the results received.

The Dreyfus Five-Stage Model of Adult Skills Acquisition is an accepted model of measuring skills across industries and breaks skill acquisition into five levels, explained in this chart:

Skill AcquisitionIsn’t it interesting that the only major difference between the proficient and expert category is that the expert is more likely to make decisions based on intuition instead of data analysis? This is true because the expert has experienced so many scenarios, they can quickly grasp situational patterns and decide accordingly. I call this “pattern recognition” and wrote a blog post about this that you can read here.

Wouldn’t you like to know whether your dentist, attorney, physician, CPA, etc. is a true expert, instead of just being competent? Of course there are times when you need — and only want to pay for —someone at the “competent” or “proficient” level (e.g. house painter). And there are other times when you want — and are willing to pay for — a true expert (e.g. defense attorney, heart surgeon). Unfortunately, you don’t often get to hire the expert at the same rate as those who are merely competent or proficient.

So how do you tell where you are on the scale? In some professions there are established criteria, while in others (like mine), it is mostly subjective. For instance, while I believe I am an expert in B2B marketing, and have the results and credentials to demonstrate this, it does me little good if smart clients are unwilling to acknowledge this by paying me (and my team) fairly for our services. I am unlikely to become the Andy Warhol of B2B marketing, but I can certainly be the best Chris Ryan possible. And you can do the same by following the strategies I will outline in my next post. Stay tuned.