Effective segmentation can grow revenue and future company worth
When the day arrives that you want to sell your business to a third party, an important question you will receive pertains to which customer segments you serve today, don’t serve today and which ones could be served going forward as a growth opportunity for them by owning your company. Having the answer, backed up your sales data, could be a key driver to the valuation an acquirer might place on your business. Here are a few questions to discuss with your team today on this important topic:
- Have we identified the various customer segments that exist in our industry today
- Are the customer segments growing at different rates within our industry….which are growing, declining or forecasted to be flat in the years ahead
- Are we focusing our sales and marketing resources on the best growth segments
- Do we see new customer segments emerging that we could consider serving
- Do we know our existing annual revenues by each of the segments we are serving
- Do we know our gross margins for each customer segment we serve and which are more profitable than others
- Which segments don’t we serve and is this by intention?
- Are there underserved or unserved customer segments today that we could serve in the future as a growth opportunity
Too often business executives lump all customers together into one group. This can work if your industry only has a single customer segment but this is extremely rare. The vast majority of industries have multiple customer segments and it’s strategically valuable to know very clearly which ones you serve, could serve more, could serve in the future and those that you deem undesirable to ever serve. At time of your future exit event, an acquirer is going to want to fully understand your customer segmentation especially for purposes of knowing what growth potential is remaining for your business. Start building your company worth today by building your customer segmentation understanding and resource deployment plan. You’ll be glad one day that you used time as a friend now in building this important muscle for your company.
