How does customer satisfaction impact business valuation?
This post was originally posted on 3rd of May 2016.
Customer satisfaction can be a key driver for growth, and for increasing the value of your business. For you to be able to reap the rewards though, you need to know how to quantify and use customer satisfaction when presenting your business.
What is the impact of customer satisfaction on your business valuation?
Research shows that businesses with world-class customer service grow at a long-term rate of 20% per annum. Those with only an average level of customer service see only 4% growth. Businesses with below average customer service are unlikely to grow at all. The evidence is clear: customer satisfaction is vital in driving business growth and value.
How a buyer will value your business is a way of appreciating the overall health of your business. Uscita’s Value Builder System™ involves looking at the kind of things that your business should be doing in order to stay healthy and grow. One of these key drivers is customer satisfaction.
How to measure customer satisfaction?
Customer satisfaction should never be taken for granted. You should be engaging with your customers regularly and ensuring that their experience is clearly measured.
You can measure customer satisfaction through organised feedback and data-gathering. This information then becomes hard evidence when it comes to valuing your business. Carrying out customer surveys and measuring customer responses are vital components in value building, but they don’t need to be complicated or time-consuming.
If you don’t already have one, introduce a system for capturing customer satisfaction using a simple Net Promoter Score (NPS). Identify the most appropriate point along your customer’s journey to ask one simple question: “How likely are you to recommend this brand/company to a friend or colleague?”
Applications such as MailChimp make this easy and affordable.
Other supporting data might include the number of opt-ins for your company’s newsletters and customer groups. You should also be tracking the number of followers you have on your social media accounts, be that Facebook, Twitter, Pinterest, LinkedIn or any others that are important to your sector of operation. These can demonstrate the influence and reach your business enjoys within its target market.
Why will a positive customer experience increase your business value?
Put yourself in the shoes of a prospective buyer of your business. You telling them you have happy customers is not enough. Have the proof ready in the form of the metrics, as above, and this then becomes powerful evidence of your company’s value that a buyer can’t ignore.
Whether you’re already measuring and documenting your customer satisfaction levels or not, find out how much your business is worth with our free valuation service.