To make your business “buyer ready” and enhance its saleability, the more you can reduce the risk associated with your company, the better your valuation and deal terms will be with potential buyers.
And that is what due diligence (DD) is all about. Before your deal closes, buyers will be sending you a document with 200-300 questions covering all aspects of your business, with the overall goal of helping the buyer become more comfortable with your opportunity.
One of the key areas covered in DD is the quality of your revenue sources – how solid are your relationships with your clients/customers? Are they so satisfied with your service or product that once the company changes hands, the buyers will be confident that the client base will be retained and grown in the future?
That is why conducting regular, documented surveys of your client base is so important. If you do these regularly and not only save the results but actually act upon the feedback, you will significantly help your due diligence process with any buyer.
Because of the importance of this, and realizing that many of you are daunted (and just don’t have time to create and compile the results of a 100-question survey), I thought I would share a basic client satisfaction tool that you can use, easily analyze and track without requiring hours and hours of your time.
Called the “Net Promoter Score,” it consists of simply one question: On a scale of 1-10, how likely is it that you would recommend your brand to a friend or colleague?
You can do this via several methods depending on which works best for you. When you get the results back, you break them into three categories:
Then you do the following calculation to determine your Net Promoter Score (NPS):
Source: The Net Promoter Network
Doing the math above, you will determine your NPS, which will be somewhere on the continuum of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter). So, if your percentage of Detractors is 10% and Promoters is 20%, you have a net core of 10, meaning you have a lot of Passive clients. This gives you an opening to look at the individual results, contact your key Passives, and determine how you can move them from Passive to Promoter. The strategies you determine are, again, tremendously helpful to produce during due diligence.
This is especially the case if you conduct this survey every six months, initiate strategies to move Passives to Promoters and can demonstrate this change over time, i.e., show the buyer that your NPS was 10 in January of 2014 but increased to 55 by January of 2017.
The great thing about this survey from a buyer’s perspective is that it is easy to track, understand, and quantify. It does not require complicated algorithms and double-blind questions for validation. And most importantly it really tracks what is most important, how your Promoter base is growing.
This is, of course, just one area covered in due diligence. There are many others. If you would like to learn more about due diligence tests, follow these links:
To discover even more about how to prepare your company for buyer scrutiny, please attend a Generational Group executive conference. We hold these throughout North America, and they are completely complimentary and free from obligation. They are designed to help business owners learn how to exit for the maximum value. To find out how you can attend, please call us at 972-232-1121, or provide us with your contact information and we will be in touch.
Even if you aren’t planning on an exit for years down the road, beginning to use the Net Promoter Score can have a beneficial impact on your business.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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