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If you’re looking to attract an investor or an acquirer one day, expect them to dig into your sales and marketing process.

If you’re a company that sells to other businesses, an investor will want to know where you get your leads from and how much each costs you to generate. They’ll want to know what technology you are utilizing to support your sales team. They’ll want to understand how your sales reps get meetings and how many appointments a good rep has each week. They’ll want to know the close rate of a high performer and how it compares to an average performer.

The investor’s questions aim to gauge the scalability of your sales model under significantly higher investment rather than simply to assess your past performance. Acquirers love stumbling over a business where the main constraint to growth is capital. They fall over themselves for a company that has an efficient sales engine that needs more fuel (i.e., money). Most investors have lots of capital but struggle to find businesses with a sales system that won’t collapse under the weight of more money.

How Gregg Romanzo Built a Sales System

In 2004 Gregg Romanzo started an old-school freight brokering business. Most freight brokers are nothing more than a handful of people arranging shipments in return for razor-thin margins, but Romanzo realized his sales model had the potential to grow into something much bigger.

Romanzo’s model involved hiring high-potential people with a relatively modest base salary of between $40,000 and $60,000 per year and teaching them the business from scratch. He armed them with a computer and access to the best scheduling software and tied their variable compensation to the gross margin of the jobs they booked. Romanzo knew if he could get a rep to clear $100,000 per year in total compensation, he would be able to keep them for the long run.

Romanzo took his very best talent—the top one or two percent—and built a team around them so they could earn even more. This cohort of salespeople could clear three, four, or even five hundred thousand dollars in an exceptional year.

Since Romanzo paid a relatively low base salary and his people didn’t need a lot of equipment, he was able to hire a lot of salespeople. By the time he sold his company, he had 200 employees, 190 of which were salespeople. That’s 95% of his headcount dedicated to sales.

How does that compare to your company? If you have a winning formula you think would hold up if you doubled or quadrupled your sales team, consider monetizing the sales model you’ve created. Either hire a lot more reps or show a deep-pocketed investor or acquirer how durable your sales model is and how all you need is their capital to grow it.

To learn more about our program and see how we can help you prepare for the sale of your business go to www.Biz2Beach.com

The Switzerland Structure

One of the eight factors that impact the value of your company is something the team at The Value Builder SystemÔ refers to as “The Switzerland Structure,” which emphasizes the importance of business independence. It cautions against excessive reliance on any single entity, whether suppliers, employees, or customers. While many business owners recognize the risks associated with dependency on a high-profile customer or employee, the hazards of anchoring to a single supplier are often overlooked.

Supplier dependency comes in many flavors, but the most pernicious is a dependency on a single marketing supplier for sales leads, such as a dominant e-commerce site or social media platform.

6 Ways Marketing Supplier Dependency Cuts Your Value

Amazon, for instance, is a prime example where businesses heavily invest to gain market access and visibility. However, dependence on a single sales platform like Amazon can devalue a business in the eyes of investors or acquirers for several reasons:

1. Increased Risk Exposure: Sole reliance on one platform exposes a business to risks of sudden policy, fee, or algorithm changes. Such negative alterations by the platform could significantly impact the business’s sales and profitability.
2. Lack of Diversification: Over-dependence on a single channel is perceived as a vulnerability, while a diversified sales approach suggests resilience and adaptability, appealing attributes to both investors and acquirers.
3. Limited Growth Potential: Exclusive reliance on one platform can restrict a company’s growth opportunities. Investors typically favor businesses with multiple channels for growth. Being bound to one platform can limit a business’s potential for expansion.
4. Brand and Customer Relationship Limitations: Operating primarily through a third-party platform may lead to limited customer interaction, hindering the development of a strong brand identity and customer loyalty, both highly valued by investors.
5. Negotiating Power and Autonomy: Dependence on a platform like Amazon can reduce control over crucial business aspects, such as pricing and customer service. Investors may view this lack of autonomy as a strategic weakness.
6. Perception of Innovation and Independence: Businesses demonstrating innovation and independence are often more attractive to investors. Over-reliance on a single platform can create an impression of a lack of these qualities.

How Chad Maghielse Improved His Score on the Switzerland Structure

Chad Maghielse’s company, Pets Are Kids Too, originated with a simple spray to help improve his dog’s breath and swiftly expanded to over $2 million in sales with a 35% profit margin within three years, relying solely on Amazon. Recognizing the risks of this dependence on the e-commerce giant, Maghielse embarked on a path of supplier diversification.

Maghielse expanded to another e-commerce platform, Chewy.com, and launched his own online store. This strategy reduced Amazon’s share of his sales to 65%, while Chewy and his store contributed 30% and 5%, respectively. A significant reduction in his business’s platform risk and an increase in its appeal to potential buyers resulted from this strategic shift.

Thanks in part to Maghielse’s diversification strategy, Pets Are Kids Too was acquired in a deal that valued the company at three times its EBITDA, with a substantial portion paid up front. Maghielse’s journey highlights the critical insight that diversification not only shields against market volatility but also enhances a business’s overall value.

Embracing the Mentality of the Swiss

Reducing your reliance on a single marketing supplier not only bolsters your company’s market resilience but also notably increases its value. Adopting a Swiss-style mindset, which values independence and strategic autonomy, is more than a tactical move; it is a key strategy for achieving sustainable growth and boosting the value of your business in the long run.

To learn more about our program and see how we can help you prepare for the sale of your business go to www.Biz2Beach.com

In the competitive third-party logistics (3PL) sector, Jay B Sauceda turned Sauceda Industries into a standout business, ultimately reaching $14 million in sales before being acquired by Cart.com.

His secret weapon? His core values: “Yes, And,” “Explore More,” and “Give a Sh!t.”

Talent Recruitment

Sauceda found his first significant opportunity with Howler Brothers, the digitally native purveyor or stylish and rugged outdoor gear whose leadership related to Sauceda’s core values.

Sauceda’s values weren’t mere posters on a wall but embedded into job descriptions, ensuring new hires were aligned with the company ethos. “Yes, And” fostered constructive dialogue, “Explore More” encouraged initiative, and “Give a Sh!t” signaled a commitment to quality.

In the fiercely competitive landscape for hourly workers, Sauceda utilized job ads as both a magnet and a filter. His distinctive ads read:

“We’re looking for someone who gives a shit about their work, gets annoyed with coworkers who don’t pull their weight, wants to level themselves up in a big way and cares about being somewhere long enough that people remember their name.” 

Such postings instantly distinguished Sauceda Industries from the mundane listings of competitors, drawing talent aligned with the company’s dynamic culture.

Employee Training and Metrics

New hires were introduced to Sauceda’s values through dedicated training programs. Performance evaluations considered not just revenue metrics but also the embodiment of Sauceda’s core principles. Employees who exemplified “Yes, And,” “Explore More,” and “Give a Sh!t” found themselves rewarded and recognized. Their Slack channel was full of praise for team members embodying their core values.

Creating a distinctive culture was crucial for Sauceda. He recalls, “Our values lived in our daily interactions, whether it was an employee going above and beyond for a client or in our collaborations.”

Client Relationships

The core values extended to client interactions, offering criteria for long-term partnerships. A cornerstone example was Howler Brothers, whose alignment with these values set the stage for both parties’ success. Sauceda emphasized, “When a client fits naturally with our core values, the collaboration is far more likely to be fruitful.”

A Valuable Company

Leveraging this values-centric model, Sauceda Industries grew from a 3,000-square-foot office in 2013 to a sprawling 126,000-square-foot facility with 150 employees by 2020. “We bootstrapped all the way to the top,” Sauceda asserted, attributing the company’s fast, self-funded growth to its value-driven framework.

In the competitive 3PL landscape, Sauceda Industries didn’t just serve clients; it built relationships based on shared values. Through strategic recruitment, impactful training, and a vibrant work culture, these core values helped pave the way for a business that thrived, achieving $14 million in sales before it was acquired by Cart.com in 2021.

To learn more about our program and see how we can help you prepare for the sale of your business go to www.Biz2Beach.com