How much untapped potential lies within your existing customer base?
For one $120 million ag retailer, the answer was staggering. We calculated eight figures of growth potential within just its top 30 customer relationships.
After implementing a process to capture that revenue and pursue other objectives, the company realized more than $30 million in incremental growth. Subsequently, the business sold a newly grown division for more than $30 million and reinvested that capital into its core business to accelerate its growth by an additional eight figures annually.
Peter Drucker, who founded modern management, introduced the term “strategy” to the business lexicon. Publishers initially resisted the word, so he used “self-assessment” instead. Regardless of terminology, one of the most crucial components of Drucker’s self-assessment is the quarterly depth interview process with customers.
When I asked Drucker about priorities of the strategy process, he emphasized focusing on customers—understanding what they value and the potential in relationships with them—could best be realized by depth interviews. Inevitably, the process leads to uncovering these opportunities:
- Innovation
- Growth potential
- Relationship (improving, growing, solidifying)
For decades, I have seen how the depth interview process can significantly enhance both the top and bottom lines more effectively than most any other effort.
Because customers would never tell a sales or service person some things, these interviews are best conducted by a third party to ensure customers feel secure and can be candid—with the option to share insights anonymously.
How to find the potential
It is surprising what customers tell a third party. I’ve had them share that my client isn’t charging them nearly enough. I’ve even had them share that their salesperson’s breath stinks. Most importantly, I consistently hear them say what it would take to earn more of their business.
Customers will share what you do or don’t change might cause them to leave for your competitor.
When I’ve led depth interviews as the core project, I’ve not failed to see the process uncover seven-, eight- or nine-figure potential for clients of $20 million or greater in revenue. At one company named ENTEK, a half-billion-dollar IT products company similar to Dell, we discovered well more than $1 billion in growth potential, and the business soon captured almost $200 million of that.
We were able to increase the valuation and sale price of the company by nine figures as it was being sold.
Depth interviews are one of the most powerful tools private equity and M&A firms can take advantage of to clarify the growth potential they or a buyer might be able to garner before or after selling a company. I have run dozens of valuations, but in choice circumstances (like those described above), combining depth interviews with the valuation process is able to significantly increase the enterprise value and sale price of the company.
Yet, when was the last time you engaged a third party to uncover the hidden potential within your customer base?
If you are thinking you might have seven, eight or nine figures of untapped potential within your customer base or you might be interested in evaluating the sale and valuation of your company, then feel free to schedule time with me. I’m glad to engage in a complimentary customer potential and growth strategy session.
