Why would someone buy your company?  The real answer is that it is cheaper or faster for them to buy your company than to recreate your business themselves.  The challenge for you in selling your business for high multiples is to convince them of this.

If you can convince them, the stage is set for a successful at a higher valuation.  For the owner of a mid-sized company, the difference can be millions of dollars. If you can’t convince them, then you may be like many business owners who leave millions on the table when they sell, simply because they don’t understand how much importance buyers place on concepts like your “Value Proposition.”

Your Value Proposition can protect you from competition – and that is why people would want to buy your company.  For example, the Value Proposition for most Swiss watches years ago was usually a variant of “we make the most accurate watches.” Then along came quartz watches that were more accurate than the mechanical Swiss watches.  Many Swiss watch companies went out of business. Companies like Rolex that survived did it by changing their Value Proposition to something more emotional – “Wearing a Rolex tells other people something about you.” 

Definition of a Value Proposition

A Value Proposition can be for your entire company, a product range or for each product or service:

• A Value Proposition is a promise you make to target customers to convince them to prefer you to the competition.

The Value Proposition is a clear statement that:

• Explains how your product solves customer problems or improves their situation (relevancy),
• Delivers specific benefits (value), and
• Tells the ideal customer why they should buy from you and not your competition (for reasons incorporating your “Point of Difference”).

The Value Proposition, then, is not really about your products or services, but about how they produce a highly valued outcome for your customer.  If you can articulate this, your business is automatically elevated above the masses of companies that fail to articulate it and are forced to compete with each other with commoditised offerings.

The Value Proposition is necessary simply because customers care more about themselves than about your products or services.  The essence is to focus on outcomes, not products or services.  At work, for example, we do not offer “business exit services.” Rather,we “take the stress out of selling your business for high multiples.”  Taking the stress out of it all was what was important to customers, not our understanding law, business and marketing.  Notice, too, that the language of our Value Proposition is the customers’ language, not ours. That’s because we interviewed people outside the office to find out what was important to them, then gave it back to them in their own words, not in MBA-speak.

These days, a Value Proposition is likely to be a sentence or headline embodying the benefit you offer, with a second sentence or sub-headline giving a more specific explanation of what you sell or do – and why it is useful to your customer.  The best ones are followed with a good visual that sums it all up.

Conclusion

Articulating a good Value Proposition serves as powerful persuasion for a buyer of your business to offer you high multiples on sale.  It is worth getting it right before you go to market.