Growth Opportunities in the SMB Market - Part II

Many technology businesses grow without ever putting a business plan together.  Even though they know the value of building a business plan they never seem to have the time to put one together. So why go through the trouble of building a business plan? To answer that question, let’s examine the topic of business valuation that I discussed in my last article. The factors used to examine the price someone would be willing to pay for a technology business includes, as expected, an analysis of core ...
Many technology businesses grow without ever putting a business plan together.  Even though they know the value of building a business plan they never seem to have the time to put one together. So why go through the trouble of building a business plan? To answer that question, let’s examine the topic of business valuation that I discussed in my last article. The factors used to examine the price someone would be willing to pay for a technology business includes, as expected, an analysis of core financial information such as revenue, gross margin, net income and customer loyalty. What is less well known is that the aspects that increase the purchase price of a technology business are based upon value added features such as the type of revenue, percentage of growth, recurring revenue, contracts and the nature of the services offered. The price of a business that has more services-such as managed services, long term contacts, internal expertise and proprietary knowledge or services-will be three to five times higher than traditional technology businesses with the same annual revenue. This is where a business plan becomes an important factor, helping you to increase revenues, profits and business capitalization.

In talking with solution providers who are shifting their business models toward services and managed services, one challenge they are finding is how to market services. There are many possible ways to go about it, but don’t expect product marketing techniques to be very useful in promoting your services. There are a variety of ways to approach it.  Following are three steps that you can add to your business plan that are best practices to create awareness of your service offerings:

1.    Referrals – There is no more powerful way to market your service-related business than through client referrals. Your current clients can and will provide referrals for you, if they are satisfied with the work you do for them. Use marketing to develop the referral process (i.e. allocate budget to increasing referrals). Provide cash or future service incentives to current clients who refer new business to you, use public relations to show your client’s solution in a case study, attend client events (such as their industry trade shows) and ask them to introduce you to others they know. Don’t forget to offer to co-sponsor their favorite charities, when appropriate (ensure these align with your business ethics and reputation). This will increase your service exposure and bring you closer to your current clients.

2.    Business Networks – Target businesses that will help promote your service offerings. For example, there are many small businesses within a single shopping mall. Rather than trying to sell each of them independently (that may have only a few systems each to service), talk to the property management company and offer them a group rate. This can be accomplished in a variety of other business networks. Hospitals have a network of doctors and insurance companies have thousands of independent agents, each a potential customer. You get the picture. Put your business plan to work and develop a strategy to market through a network of business relationships.

3.    Leveraging Partners–If you have an area of expertise that aligns with certain technologies, examine the different partner offerings that provide lead generation. Work closely with the regional representatives to have them refer business to you.

This article covered a huge potential market (small businesses who self service), the best way to grow your business (maximizing business value from services) and a few marketing ideas. In future discussions, I hope to continue the discussion around business plans and provide key operational metrics to consider as your business grows.

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