Why good use of data is important in a company sale
When buyers look over a business they’re thinking about acquiring, they want to see that the financials are up-to-date and in order, that a management succession plan is in place, and that contracts with important customers and suppliers are all locked down.
And increasingly, they also want to see that the company has good data governance – that is, its data is secure, accurate and available – and that it’s making good use of that data.
Just as would-be buyers would be deterred if they found a target company’s financial records spread across different spreadsheets and accounting systems, they would also be concerned if they found uncoordinated and dispersed sales, customer and operational data.
Buyers want to take control of a businesses and immediately start drawing on the power of data and analytics to drive sales and operational efficiencies. If they know they’re going to have to spend months or even years getting the data in order, they will either offer a lower price or walk away altogether.
Identifying high value customers
A few years ago I helped a fitness brand with gyms in Australia and Southeast Asia get its data in order ahead of a sale.
The business had several different gym brands ranging from budget to premium as well as a couple of popular fitness apps and each had its own individual method of storing and categorising data. Collating all the data into the one place and a single uniform format – what we call extract, transform and load – was a significant undertaking that took several months.
But once the data was in order, it became a valuable tool for driving sales.
We identified seven different customer profiles across all the company’s brands, based their demographics, how much they spend and how often the use the gym. We could see the really high value customers across brands and focus on recruiting more members from this cohort.
For instance, we discovered that the company had a large number of women in the over 50s categories who attended the same class several times a week. For them, gym visits were as much as social activity as a fitness activity.
Armed with this information, the company could change its service mix to appeal to these sorts of customers and devise promotions targeted specifically to this cohort.
It meant that when buyers were carrying out their due diligence, they found a company that was making sophisticated use of its data and basing business decisions on data rather than gut feel.
And of course, the data collation exercise had also helped the fitness company improve its sales, which was another plus in an acquisition.
The strategy was a success and a private equity firm bought one of the gym brands for what the owners considered to be a good price.
Data should be treated like an asset
Preparing a company for a sale can take months and even years, and business owners shouldn’t treat data as an afterthought. It is a critical business asset and needs to be managed as such.
And of course, there’s another upside to getting data in order. Regardless of whether the company sells or not, management will armed with valuable insights on cost management, sales drivers and operational efficiencies to help them create a better business.