In the acquisition process, revenue metrics are critical to assess business value. However, the need to assess customer health is often overlooked. In customer-facing businesses, this is especially dangerous.
Without a clear “line of sight” into customer satisfaction and retention, an acquiring company (e.g., family office, VC, or angel investor) may overlook evidence that indicates an acquisition may not result in incremental revenue or synergy with existing businesses.
For businesses that are sold using a revenue multiplier, a significant miscalculation can result in a lower exit price. Both family offices and business owners do not realize the hidden factors that can negatively impact a sale. As the deal size grows, those risks increase.
Conversely, hidden positive factors can surprise to the upside, and support a significantly better acquisition price or sales story. As part of an acquisition and revenue assessment, looking at the entirety of your customer or user base is essential to understand the real value of the business now and into the future.
Who benefits from a revenue and customer health assessment?
Investors and family offices of every size can benefit, but there are three distinct beneficiaries of a revenue optimization and customer health assessment when a business is bought or sold. They are:
- The business owner who wants to maximize his or her exit value.
- The potential buyer (family office, angel investor, or VC) who wants to minimize the price paid.
- Another party who may be in dispute with the owner, and who wants to minimize the price that they pay (or conversely, maximize their ownership share of the business).
Conflicting interests can be addressed through a well-executed revenue and customer health assessment using research. The approach used by Surveys & Forecasts, LLC evaluates revenue potential and customer health in a systematic and independent manner:
- We employ a variety of tools to estimate prospects for growth, forecast volume, share, and satisfaction.
- We profile relevant products, brands, and services to assess your competitive position.
- We combine findings to provide an unbiased estimate of revenue potential. We can combine this with financial professionals who have the tools to assess performance in the absolute and relative to a peer group.
- We work with clients on a per project or ongoing retainer basis to provide guidance and market intelligence for the business.
Additional detailed information can be found here, To discuss whether a revenue optimization and customer health assessment is appropriate for an acquisition your office is considering, please get in touch at info@safllc.com or at +1.203.255.0505.