I model railroads in my spare time. It's a fun way to relax, and I enjoy the attention to detail that it requires.
Recently, I had a small issue when building a particular model - I was missing a couple of small, but important, parts.
Now, usually, the pervading wisdom is that the contract is between the purchaser and the shop. However, you can't really ask a shop to take back a partially built model - normally they won't even take back a box that's been opened.
So, I emailed the manufacturer direct. To make a long story short, they agreed (actually, they offered) to send me the missing bits. Two, lightweight, bits of plastic was what I was expecting, and that's what I got.
Plus a catalog of new releases. And a newsletter (paper) which has introduced me to some interesting developments that I wasn't aware of. And a letter, visiting card, and associated advertising flyer.
In fact (and I've checked!) the paper weighed more than the plastic, and no doubt contributed to the postage cost which was around 1/3 of the price of the model in the first place...
On the other hand, I now want to do more business with them. Despite the fact that I was irritated when it went wrong (missing pieces) I want to do more business (buy more stuff) with them.
If I'd just received the plastic bits, I would have been happy. But, by putting some bits and pieces of information in the package, they've made me loyal. I feel loyalty to someone for making the effort to inform me.
That's a powerful lesson, but it could have been improved.
What They Did Right
They fixed the problem. They sent me a letter, and they put a good mix of valuable content and advertising in the package.
What to take away : whenever you have contact with a client, always use it as an opportunity to provide them with additional content of value, and remind them why they bought from you in the first place, and why they should do so again.
What They Did Wrong
The letter was in German, but all our communication up to then had been in English.
What to take away : make all follow-up communication relevant to the needs of the customer. They've very nearly alienated me by this oversight.
What The Could Have Done More (or Better)
There was no encouragement to buy more from them. I have reason to, thanks to the information, but I don't have the additional push that makes it worthwhile. Other retailers have included money-off offers, vouchers, and so forth.
What to take away : it's not enough to give a reason to buy from you; even prospective repeat customers need a push!
All of the above applies to online and offline businesses. Every email, every delivery, every apologetic letter after a complaint deserves to be treated as an opportunity to build trust and loyalty with your customer base.
Showing posts with label value. Show all posts
Showing posts with label value. Show all posts
Wednesday, 4 January 2012
Wednesday, 3 August 2011
How Much is my Business (Idea) Worth, and How to I Get Out?
Serial entrepreneurs often start up companies thinking about one thing, and one thing only : what is my exit strategy?
Put another way – how are they going to get out of the company when they either get bored, or have realized enough value that it becomes more worthwhile to sell it on (or shut it down and dispose of the assets accrued) than keep it ticking over.
The most clinical approach is to build the exit into the business plan, and use that as a way to see (indeed, test) whether the whole venture is actually viable. If the exit strategy is to sell the whole company on as a going concern for a value of 1 million pounds (Euros, dollars, etc.) in five years time, it becomes relatively easy to work backwards through the numbers to test for feasibility.
Other exit strategies also include going public (selling shares on a stock exchange) or selling the company purely on the basis of its value to a competitor or related business – think of Google’s acquisition of YouTube, or Twitter buying TweetDeck, for example – where the classic measures of revenue, profitability, etc. don’t really apply.
However, these are subject to specialist knowledge, market awareness and probably a healthy dollop of good luck, so to provide an empirical example, we shall assume that the business valuation is designed to provide value to an investor – be it 100% (disposal) or some fraction thereof (to garner investment, or when going public.)
This kind of valuation is usually based on current performance. Examples of companies valued on potential performance (the most famous being PayPal) can also be found, but these are relatively special cases : for those that manage a PayPal, there are many, many, successful serial entrepreneurs who never see that level of IPO success.
On the other hand, many start-up investors will also be looking at potential. However, given that it has to be grounded in the figures that reflect believable performance, the discussions about exit strategies also apply here.
There are many, many approaches to valuing a company:
A common measure is to take three to five times profit, and use that as a nominal value to establish targets for exit or investment. From the other side of the table, so to speak, if an entrepreneur needs 10,000 pounds (dollars, Euros, etc.) investment, for a 20% stake in their company, the investor will be expecting to be able to see at least 50,000 pounds worth of company value, as well as a return of 5-10% (using a better than bank rate) on their investment.
Using these techniques, it should be relatively easy for budding entrepreneurs to appropriately value their business idea, and potential of their start-up company.
Put another way – how are they going to get out of the company when they either get bored, or have realized enough value that it becomes more worthwhile to sell it on (or shut it down and dispose of the assets accrued) than keep it ticking over.
The most clinical approach is to build the exit into the business plan, and use that as a way to see (indeed, test) whether the whole venture is actually viable. If the exit strategy is to sell the whole company on as a going concern for a value of 1 million pounds (Euros, dollars, etc.) in five years time, it becomes relatively easy to work backwards through the numbers to test for feasibility.
Other exit strategies also include going public (selling shares on a stock exchange) or selling the company purely on the basis of its value to a competitor or related business – think of Google’s acquisition of YouTube, or Twitter buying TweetDeck, for example – where the classic measures of revenue, profitability, etc. don’t really apply.
However, these are subject to specialist knowledge, market awareness and probably a healthy dollop of good luck, so to provide an empirical example, we shall assume that the business valuation is designed to provide value to an investor – be it 100% (disposal) or some fraction thereof (to garner investment, or when going public.)
This kind of valuation is usually based on current performance. Examples of companies valued on potential performance (the most famous being PayPal) can also be found, but these are relatively special cases : for those that manage a PayPal, there are many, many, successful serial entrepreneurs who never see that level of IPO success.
On the other hand, many start-up investors will also be looking at potential. However, given that it has to be grounded in the figures that reflect believable performance, the discussions about exit strategies also apply here.
There are many, many approaches to valuing a company:
- Wikipedia : Business Valuation
- How to value a Business on BusinessLink
- ‘How to Value a Young Company’ by Martin Zwilling (Forbes.com)
A common measure is to take three to five times profit, and use that as a nominal value to establish targets for exit or investment. From the other side of the table, so to speak, if an entrepreneur needs 10,000 pounds (dollars, Euros, etc.) investment, for a 20% stake in their company, the investor will be expecting to be able to see at least 50,000 pounds worth of company value, as well as a return of 5-10% (using a better than bank rate) on their investment.
Using these techniques, it should be relatively easy for budding entrepreneurs to appropriately value their business idea, and potential of their start-up company.
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