Does your company offer too much?

If you’re one of the many companies looking for ways to grow, it’s time to take a moment to think about what type of growth is best for you – not just in terms of ‘sustainability’, but in terms of what kind of growth will add genuine value to your business.

Most business owners are familiar with the concept that not all growth is equal. Fast and unsustainable growth can result in sudden collapse – the dotcoms showed us that spectacularly – and poorly targeted investment can deliver disastrous returns.

Many companies grow by broadening what they do in a bid to sell more to their existing customers, but there is a more strategic alternative and that’s to go deep into one particular product or service (or a combination) and become a niche expert.

By offering more product lines you can of course sell more to your existing customers and perhaps capture some new ones, but by offering something unique and focusing your growth investment on that you will also drive up the value of your business.

Big companies often lack the innovation to create new products or services that genuinely add value to their existing customers, but they do have the strategy to recognise value elsewhere – and the capital to buy it up.

Research by Built to Sell Inc found that, when it comes to selling a business, having a niche makes a real difference. While the average company received offers of around 3.5 times their pre-tax profit from buyers, those offers jumped to 5.4 times – around 50% more than the average – if they had a unique product or service for which they had created a virtual monopoly. These companies even outstripped the offers made on fast-growth companies (those with a historical growth rate of more than 20%) – by a full 20%.

It makes sense – an acquiring company will be more attracted to a business that has something special to offer, something it does better than almost anyone else out there, and that has built its brand and customer base around being extremely good at what it does. The acquiring company will pay a premium for a unique product or service that is a good fit with its own offering, and where the investment in R&D and brand-building has already been done.

So if you’re looking to grow, and you have half an eye to the future saleability of your business, don’t just go the average route of adding more lines to sell to your existing customers. Take a look at what makes you special, what you have the ability to offer better than your competitors, what unique offering you might be sitting on that your customers truly value you for. Then invest in refining that offering so that growth comes from customer loyalty, from word-of-mouth, and from mopping up the dissatisfied customers of your erstwhile competitors.

Anyone can add random product lines. Not everyone can be #1 in the same niche.

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