Nov 20, 2024 | Communication, Management, Strategy
When thinking about selling your business ensure you spend time and effort identifying the intangible components that could contribute up to 90% of the value of the sale
Almost 6 years ago I wrote a post that identified intangible value at 87% of the Standard and Poor’s index. An update to that index done by Ocean Tomo now puts the number at 90%. While this is a small increase only, it is off an extraordinarily high base, and the index is based on 2020 numbers. Given the run of technology stocks over the last couple of years, I hazard a guess that the number is now well over 90%. It is the last 10% that is, as everyone knows, the hardest to capture.
This is a considerably greater percentage than the other major stock market indices. For example the European S&P at 75%, Shanghai Shenzhen index is at 44%, and the Nikkei sits at 32%.
This wide disparity comes from the makeup of the indices.
The US S&P top ten contains nine technology businesses the outlier being Berkshire Hathaway. In order, on Nov 16, 2024, the top ten and their share of the index is:
NVIDIA 7.2%. Apple 6.8%, Microsoft 6.2% Amazon 3.8%, Meta 2.5%, Alphabet 2.1%, Tesla 1.8%, Broadcom 1.7%, Berkshire Hathaway 1.7%.
Even amongst these behemoths, there is a strong skew to the top three. This top ten constitute 35.4% of the total value of the 500 companies in the S&P index. The Pareto Principle at work, again.
The trend is also clear amongst the other major indices. From much lower bases, they are all heading towards the increasing valuation of intangibles in the total value of their stock.
Ignoring this trend and failing to respond is leaving money on the table.
Over the last few years, I have consulted on several projects where small businesses have been sold. In each case, the sale has been made at a considerable premium to the standard industry multiples that would usually be applied. The driver of the premium has been the effort put into identifying and articulating the value of intangibles to the purchaser. I’ve called it finding the ‘Rembrandts in the roof’, a phrase I picked up somewhere after reading of a dusty Rembrandt was discovered and authenticated in the roof of an old house in Amsterdam 30 years ago.
Are you actively looking to identify and quantify your hidden Rembrandts?
Oct 18, 2024 | Communication, Customers, Marketing
The sales funnel, often depicted in materials promising a path to riches, has profound flaws.
It implies two misleading concepts:
Gravity: The notion that business arrives at your door via discrete steps in a gravity-driven funnel is nonsensical.
No customer focus: Until the bottom of the funnel, where deals are signed, the emphasis is on marketing tactics rather than the customer.
Success demands that a customer is willing to pay for a need to be filled, an itch scratched, or an aspiration fulfilled that’s worth more than the price paid. Value must be created for the customer.
Even for everyday consumer goods, not everyone is in the market all the time. For most products, consumers are only occasionally in the market. In B2B sales, buyers may only appear once a decade, and they’re often not the ones who ultimately make the decision to buy and authorise payment.
These factors lead to the conclusion that the standard templated sales funnel is fundamentally flawed.
My alternative, displayed in the header, is more realistic. It shows progression through a sales process powered by the quality of attraction at each point. It starts with the customer being in the market only occasionally. At those times, you must be included on their list of possible solutions, usually weeded down to a shortlist for further investigation.
At each stage, customers face friction, go/no-go decision points, as they move towards a transaction. Your marketing collateral and overall impression contribute to overcoming this friction. For example, a potential car buyer will suddenly notice many shortlisted brands on the roads simply because they’re now aware of them.
This process is called the “frequency illusion” or its formal name: the “Baader-Meinhof phenomenon” (A scary name for those over 65.) It involves two related psychological concepts:
- Selective Attention: Once aware of something, your brain automatically looks for it, making it more likely to be noticed.
- Confirmation Bias: Encountering the thing you’re now aware of, your brain notices it, making it seem more prevalent.
Templated sales funnels tend to oversimplify the complexity of a customer’s journey towards a purchase. They rarely accommodate the differing behaviours of potential customers, lack recognition of the reasons one prospect drops out, and others circulate between stages as they reflect on the purchase. They completely ignore the impact of competitive activity and offers that may emerge, and tend to emphasise quantity over quality of prospects gathered.
By starting at the exact opposite end, where the potential customer lives, you should be much better able to craft marketing collateral and action points that reflect the real position in a purchase journey of a prospective customer.
Oct 2, 2024 | Communication, Marketing
Marketing is about stories, and most stories start with an event, situation, or circumstances recorded in narrative form.
Being a marketer, I write frequently. Some of my musings are published on the StrategyAudit blog and often elsewhere. I also keep extensive files on ideas, snippets, URL’s of interest, anecdotes, and potentially useful metaphors. Usually it feeds my own interests, ‘ideas bank’ for this blog, and serves my clients.
Writing provides clarity, it helps give ideas substance, and form, and reveals holes. It also makes them stick in memory. Writing well will become even more critical as we spend more time prompting machines to give us answers. Machines are literal, failing to interpret the nuances of language we usually do not see.
When a piece is evolving towards publication, there are 4 basic rules of editing gleaned from experts I set out to follow.
- As short as possible, no shorter
Short, simple words make writing clearer and provide a better base for the reader’s imagination. I keep in mind Ernest Hemingway’s challenge to write a complete story in 6 words. His famous contribution was: “For sale: Baby shoes. Never worn.”
Remove words that do not add meaning. Words such as just, very, and so.
- Strong and simple words only
Using a weak verb with an adverb is both weak and adds unnecessary words. Find strong verbs to replace weak verbs and adverbs.
E.g. “Susan sprinted to the gate” instead of “Susan ran quickly to the gate.”
Similarly, use strong nouns.
E.g. Use “mansion” instead of “grand house,” or “athlete” instead of “outstanding runner.”
Ditch the thesaurus, those long, flowery words impress only you, not the reader.
- Replace passive voice with active
Passive voice is an engagement killer. It removes room for the reader’s imagination.
E.g. “The bully stole the boy’s bike” instead of “The boy’s bike was stolen by the bully.”
E.g. “The storm destroyed the garden” instead of “The garden was destroyed by the storm.”
Along with adding unnecessary flowery words, using passive voice is my most common error.
- Edit and edit again
No first draft is ever perfect. Ensure the basic stuff like spelling, grammar, capitalization, and comma placement are correct. Make sure each sentence is as short as possible and contains only one thought. Then read the copy aloud, or have a tool read it to you. I use the read function in Word to avoid the trap of reading aloud what should be there rather than what is there. It is amazing how many simple mistakes are revealed by having copy read back aloud.
Application of these four rules does improve the understanding and readability of your copy. This post has been edited, and re-edited numerous times with these 4 rules applied.
How did I do?
Sep 16, 2024 | Branding, Communication
‘Marketing’ & ‘Communication’ are two words that should not be compounded. They have entirely different meanings.
The confusion of meaning amongst quasi marketers is the beginning of wasted marketing budgets. It is also the source of much of the dumb rubbish clogging up the digital pipes.
Following are 4 strategies to increase effectiveness.
Define the objective of the communication.
What seems to happen here is that the tactics become confused with the objectives. This is not about optimising your website, or deciding whether or not to use Facebook ads, it is about creating the outcomes you want. Create demand for a product, generate awareness of the company, attract funding, and many others may be the objectives of a marketing investment, but they are not the tools for implementation. Lack of clarity of objectives, time frame, and performance metrics, is a basic marketing sin. I always advocate for a SMART framework.
Who is the audience?
Having figured out why you are communicating, the obvious next step is who you need to communicate with. Who is your ideal customer, and who do you need to engage to generate a transaction?
Your ideal customer may be hospitals with specialist surgical services. A relatively specific ideal customer, but inside that customer, there are those who sign the order, engineers who assess regulatory compliance, accountants who have control over budgets, and the medical staff who use the product. All have different concerns and motivations, and all require differing communications. Understanding the audiences, crafting messages and selecting the channels by which they will be delivered should be second nature.
What does your audience want and need to hear?
Often these are two different communications. They may want to hear about the prices and delivery times, but they need to hear about the regulatory status, availability, and detailed specifications of the range of options being presented to them.
Your task is to clearly communicate what it is you are offering, the benefit it delivers, and why they should care, along with presenting a call to action that is compelling.
How do you communicate?
What is the tone of the messages, and how do you reach the target is the oldest marketing challenge in the book.
Every successful marketing communication is in some form a story. Do you use drama, comedy, a villain, testimonial, or do you use an academic approach to the copy? This even applies to the blazing headline of a huge price reduction, where that is the only thing in the ad. Even that tells a story to those that see it.
What media is used, newspapers, magazines, social platforms, direct mail, email, digital advertising, face to face? In most cases it will be some combination of these, and many other options available to deliver messages.
While writing this post, it was constantly in my mind that ‘everyone knows this stuff’ and ‘nobody out there needs to be told, again, how to suck eggs’.
However, the weight of crap I see floating across the web, and sadly into my inbox, unsolicited, told me otherwise.
I am confident nobody reading this needs to hear it again, but perhaps you could share it to your less enlightened comrades.
If you want to get noticed, lift your game!
Header illustration via DALL-E in 5 seconds.
Aug 22, 2024 | Collaboration, Communication, Governance
Throughout history, humans have existed in small groups, tribes, and clans. We have worked together for the common good of the small tribe, and often, perhaps most often, been at odds with the tribe across the river.
British anthropologist Robin Dunbar introduced his theory that humans can maintain stable social relationships with no more than 150 people. This is a theory now so well accepted that ‘Dunbar’s number‘ has almost become a cliché.
The phrase ‘Stable Social Relationships’ has particular relevance in the age of social media platforms. How many friends do you have on Facebook, connections on LinkedIn, followers on Instagram?? For many, it is way beyond 150, often into the many hundreds, and often thousands.
How do you maintain Stable Social Relationships’ with that number of people?
Answer: you cannot.
Social media gets the blame for all sorts of things, rightly so, but it is not the fault of the platforms, it is the fault of evolution.
Our application of technology has run way ahead of our evolutionary capacity to manage it and retain the relationships that made us the most successful species ever.
It seems to me that the growth of private messaging, reversion to personalised even hand written notes, and emotional engagement of ‘Local’ things is a response to the ‘platformisation’ of our social relationships.
I think it is a trend that will continue and grow.
The power of social media platforms will slowly erode as more one to one enablers incrementally retake the ground lost. In the process, we humans will build up ‘evolutionary resistance’ to their power.
I do however see some hurdles in the way, the dark side of social media is as powerful as ever, and Dr Dunbar has little advice on that score.
Header cartoon credit. Lynch. (I have no idea where I found it)
Jun 14, 2024 | Communication, Governance
You cannot expect the right answer to come from the wrong question.
Too often we spend inordinate amounts of time trying to answer those questions before we understand the context or the ‘frame’ from which the answer will come.
Before anything else, to ensure the best answer possible, consider all the ‘frames’ through which the situation in front of you could be seen. Hypothesise what alternatives to the immediately obvious could be possible that might drive the situation you are examining.
Several months ago, early on a summer Saturday evening, I was walking my dog. As I passed the church at the end of my street, I saw a vague acquaintance crying.
There were a few other people milling around, so I just made an assumption without realising that is what I had done, and offered to help if I could. Her response was that she was Ok, crying for joy, her first grandchild had just been baptised.
Clearly the question that popped into my head led to an entirely to the wrong conclusion that her crying was from distress.
The frame through which I observed the woman crying led to making an automatic, but incorrect conclusion.
How often in our commercial lives do we ask questions which just assume the presence of some factor, when in fact that assumption is wrong?
The lesson here is make sure you have the context right before you start coming up with answers.
Header credit: Tom Gauld at www.tomgauld.com
