A value proposition

So often when I sit with capable and serious buyers of businesses, in meetings with sellers, a question which comes up is: “So what is the value proposition of the business?” Sometimes the seller looks blank, before asking what that means.

The value proposition of a business is the reason a customer has for buying from the business, rather than the one around the corner, this business’s goods rather than an alternative, or even this business’s goods rather than nothing at all.

Examples may be as simple as the fact that a particular petrol station in a small town is the only one which stocks 50ppm diesel, or it may be that the owner has a very sensitive finger on the pulse of prices in the immediate vicinity. At the safer end of trading, it may be that a particular importer is the only one who represents a particular sought after brand in a geographical area.

Other value propositions come about as a result of the infrastructure of the business – perhaps branches in all the main centres, or a very dynamic and effective web page, or a huge army of sales people.

Perhaps the value proposition comes about from the partners of the business – perhaps a unique logistics arrangement or a geographical position making it very easy for collection or delivery. Or perhaps it is just the way in which the business markets itself.

Stop for a moment and think (if you haven’t been doing so while reading the previous paragraphs) about what the value proposition of your business is, and then consider the following:

When you eventually come around to selling your business, the business itself will be pitted against other businesses on the market at that time, all looking for a limited number of investors with a finite supply of funds. It is unlikely that they will even be similar businesses. As a result, the value proposition shifts away from what the business’s customers see in a business, and towards what an investor or business buyer sees in the different businesses for sale at that time.

See what I did there? Your focus now has to be on why an investor will buy your business, and not the business on the other web site. The welcome corollary is that the higher your value proposition, the more you will actually get for your business (provided your value proposition is not to ask for too low a price, or be in a position which makes it necessary to accept the first offer).

Put simply: When a business is being sold, it needs to appear head and shoulders above its competing business sellers at the time.

So here’s another value proposition:

You come along to my PrepareYourBusnessForSale™ seminar on Thursday 18 July 2013 at 7pm. I will show you what makes up the value of a business, not to you, but to buyers of businesses. I’ll show you what turns them on, and perhaps more importantly; what turns them off.

I’ll show you how to turn your business into a value proposition, quite apart from businesses which are not prepared for sale properly.

You donate a minimum of R380 to The Vula Programme, and I’ll show you exactly what buyers of businesses think through in their business buying valuation exercises.

There are some catches:

• You pay direct – no middleman to take a commission or admin fee. Vula gets every cent.
• You get a section 18a tax certificate
• You get BEE points
• Some kids get a better chance at a better education in a rural area

You can book here, and receive further instructions.

These are our sponsors for the evening:

• Eugene Herbert of Master Drive and his team will be providing refreshments at the break.
• The Gordon Institute of Business Science (GIBS) will be providing the venue.

I’ll see you there.