Take Share to Regain Value
The problem facing many businesses and owners is how to regain revenues and earnings in 2021 after a COVID-19 affected 2020. Those that figure this out will ‘take share‘ (market share) and create significant value. After nearly a year of playing defense, it is time to go back on the offense to achieve liquidity in an M&A event. How you plot a course to regain value and achieve what we call exit velocity – the discipline and art of increasing revenue and earnings on the way to a partial or full liquidity event – is crucial to achieving your dream M&A outcome.
Even for those companies not seeking to exit, or getting started with exit planning, a grow or die mentality will serve you well in 2021.
We find that three different corporate leaders and entrepreneurs arise when hit with adversity: Survivors, Reactors, and Accelerators.
Survivors – do just that; hang on and hope customers and business come back while operating in the status quo.
Reactors – trial and error experimentation to revive share, management may or may not come back with same core values and value proposition as pre-COVID-19.
Accelerators – those who proactively ideate and execute a growth strategy will achieve exit velocity and indeed take share amidst market disruption.
If taking share sounds too predatory to you, perhaps deciding who you will be within your segment is the right step:
a.) Market Leader
b.) Market Neutral
c.) Market Laggard
Acquirers will assess your COVID and post-COVID management capability by ranking against your peers. A proactive growth mentality is perceived much more favorably than a “wait and see” approach by prospective buyers.
Taking share and achieving market leading growth will be critical to achieving a “dream business exit” in 2021
Here are the practical steps to move forward and accelerate in 2021:
Step 1: Figure out which one you are at present. With your team, conduct a full assessment of your marketing, sales, and customer conversion acuity. Be brutally honest, and focus on solutions to your observations. This should include what you will do and, equally important, what you will not do going forward—expressed differently, what resource allocations are not yielding growth and contributing to growth and profitability? Know yourself and set the benchmark of where you are now.
Step 2: Examine your competition, specifically their reactions and market moves. Are they adding or shedding people and plants, adding services, or contracting? Are they introducing new offerings in response to a changing marketplace? Run a SWOT (Strength, Weakness, Opportunity, and Threat) Analysis on your competitors, utilizing everyone in your company that knows the competition and the market. Use your salespeople and speak to your competitors, customers, and suppliers to attack weaknesses in your competition.
Step 3: Examine the critical function or approach your customers most value with a “take share” philosophy. What one thing will you commit to, and where will you invest? How much investment is going back to your existing customer base vs. attracting new logos (new business)? Quickly probe enemy lines with teasers of your latest offerings or service areas. These do not need to be bold, dramatic, or “bet the farm” moves. Small yet meaningful, focused efforts may be enough to take advantage of some disruption in supply markets. Test and re-test for adoption and learn more of what your prospects want and need in 2021 as their businesses have also changed.
This process would also be incomplete if you did not look at opportunistic buy-side acquisitions or acquire distressed companies as part of an inorganic growth strategy. Buy vs. re-build is a valid response given the COVID-19 market disruptions to otherwise good companies. Weaker companies with good assets will exist in most markets.
Step 4: Communicate internally and externally: It will be critical to communicate across all areas of your organization exactly which hill you are trying to take and why. Once that’s done, name and claim it with your customers as well. Chances are, they will need to hear it several times to awaken to your offering.
Step 5: Execute flawlessly and tirelessly. The adage “execution eats strategy for breakfast” is true now more than ever when taking share and overcoming competition. Having tested your offerings, ensure your delivery teams are flawless in their execution.
Step 6: Keep score: If you plan to position your company for growth again or achieve exit velocity, a ‘take share’ mentality in 2021 is required. Buyers offer premium valuations to companies exhibiting an “up and to the right” growth trajectory, exhibiting a 10% CAGR (Compound Annual Growth Rate). Having established a COVID-baseline, keep meticulous scores and rely on the numbers to make course corrections.
Private equity and other acquirers will surely ask, “How did COVID affect your business?” and most importantly, “What did you do about it, and how did you achieve market-leading growth coming out of it?”.
While we understand no CEO could have anticipated the COVID-19 Pandemic, those with an accelerator mindset and looking to “take share” will be closer to achieving a liquidity event than those waiting for their markets to recover fully.
To arrange a confidential call to discuss how Merit Investment Bank helps companies and their leaders take share and achieve exit velocity please call
Craig Dickens, CEO @ 253-370-8893
or email Craig.Dickens@meritinvestmentbank.com
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