You, as a business owner, need to be aware of the vulnerabilities faced by your business if the products and services you offer are easy to replicate.
Step 6 – Make your products and services easy to scale-up and difficult to copy
A buyer who sees your business as a useful addition to their own range of products and services is bound to ask the question: ‘Do we need to buy a whole company, or can we simply buy assets and poach some good people?’ Therefore, your business is worth a lot more if its operations are difficult to replicate.
The key aspects of your business include the uniqueness of your knowledge, the appeal of your product and service mix versus that of your competitors, and the level of product and process innovation. Do you have valuable patents and registered designs? Do you have a large capital base that would be expensive to set up and provide a barrier to entry?
If you’re happy you’ve done everything to make it hard for existing or new competitors to take business from you, how easy is it to expand your business? A buyer will want to grow what you have worked hard to establish.
A high level of expertise and in-depth knowledge that addresses a service provider’s offer to customers is a good way to command a premium price and keep customers locked-in. It is important to remember that expansion is restrained by the number of employees with these skill sets.
If every customer is provided a tailored product, or services are custom-made to specific needs, the business or product is time-consuming, resource-hungry and difficult to roll-out.
Providers of bespoke products and services may benefit from exploring a more consistent range of packaged services which are then modified to customers’ needs. These can be understood by a sales team with a broader skills-set, under careful guidelines for implementation, and therefore expanded much more rapidly.
In our next instalment, we will discuss management of financial information and the importance of ensuring that the reports are good, complete and reliable.