When bringing a company to market, you have a lot to think about. One key element is building the company story; one that weaves all the compelling highlights that would trigger the right buyer to act.
Quality of Earnings (Q of E) is a big part of the story and one to which any buyer will be keenly attuned. At its core, Q of E is about sustainability of revenue and profits into the future. Without a doubt, the buyer’s due diligence will focus intensely on this. Of course, there is an historical aspect, that must carry into the future.
The astute buyer will want to do their own customer study. It’s common practice for the buyer to ask to speak to key customers. This is always a flag, for obvious reasons. Who wants to risk that key customers will be tipped off that the company is contemplating a sale? This drama plays out in most company transactions. But without an earnest customer study, how else can you assure that past earnings carry into the future?
Why not do your own customer study to bolster the story? By doing your own, I mean, engage a responsible third party to do it? One that knows how to elicit customer loyalty insights without disclosing intentions to sell.
Here are the advantages:
- First, providing customers are indeed loyal and future buying intentions are intact, you have a good and detailed story to tell, again with third-party objectivity.
- Second, you might defuse the buyer’s desire to speak to the same customers who participated in your pre-emptive study. Perhaps they instead speak with other, less important customers to fulfill their need to satisfy the due-diligence requirement.
- Third, if there is an innovation in development at the company being sold, customer pre-acceptance of the new product is an important part of the valuation story. This can be weaved into the same conversation.
The more you can control, the better. The best offense is a good defense.