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SMEs need CRM to plan exit strategies

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18th Oct 2006
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Small and mid-sized enterprises (SMEs) can use CRM to get the best value from their business at an exit, succession or transition according to a new Sage Software Business Minds survey.

According to the study, carried out by Vanson Bourne, 70 per cent of respondents cited having customer data in a single CRM system as a tangible asset with such exit strategies.

But only 35 per cent use a CRM solution to help advise on their business strategy while 65 per cent of SMEs are unsure about their exit strategy.

"We believe SMBs have an opportunity to make the goodwill locked away in customer data a very tangible and accessible business asset," said Dave Batt, senior vice president and general manager of Global CRM for Sage Software. "In particular, when considering any form of exit strategy customer data can provide insight into customer buying trends for buyers or investors."

With consolidation and heavy M&A activity, IPOs have slowed down. According to the survey, selling to a third party (34 per cent) was seen as the most popular exit strategy globally with Australia (53 per cent), USA (42 per cent) and UK (39 per cent) making it their clear choice.

Customer relationship management industry analyst, Denis Pombriant of Beagle Research Group, said: "It is no secret that customer data is crucial for SMBs that want to maximize their value at exit. A CRM system is a natural customer information repository and the best way of accessing and managing customer data. CRM is an important asset when seeking an exit.

"The majority of SMBs recognize that CRM is a tangible business asset but few are using it as one. Customers are an important asset that many SMBs overlook when valuing a company. If organizations believe that customers are at the heart of business - which most undoubtedly will - then they should consider how to best manage customer data right through the business lifecycle to an exit."

The findings by Sage were part of a global study exploring the relationship between the use of customer data, business strategies and performance.

The Sage research surveyed 800 SMEs of all revenue sizes and industries across six countries, ranging from zero to 1000 employees, by Web and telephone during July 2006. The UK and USA provided 200 respondents each, while Australia, France, Germany and Ireland each had 100 respondents.

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By DavidMeggitt
19th Oct 2006 17:21

An important set of findings......

Dave Batt has almost "got it!"

Customer relationships, as part of external business relationships, provide the means to create tangible exchanges of value. (Contracts yielding cash for services/products).

What CRM software also provides, of course, is information communicated between individuals in organisations that deliver uncontracted information, favours et al that make the relationship work.

Whilst exit values must take account of pipeline orders (it would be odd if they didn't), I wonder what, if any, account is taken of the other information locked/noted in the CRM systems - the flow of intangible deliverables and associated exchanges which make up economic value.

Maybe this is what Mr Batt really means. Interested to know.

For more on the thinking behind this refer to value networks (www.value-networks.com)

David Meggitt

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By Jeremy Cox
20th Oct 2006 16:50

I agree with the thrust of this article. However to really get serious about 'customers as assets' these firms need to take a disciplined approach to their 'customer portfolio'.
1. Segment customers by revenue and profit performance
2. Consider potential lifetime value of customers
3. Develop a portfolio strategy + long term goals
4. Segment desired customers by benefits sought and behaviours to really get underneath their needs
5. Assess capabilities to fulfil customer portfolio strategy in the light of this new understanding
6. Identify gaps
7. Fill gaps - people, process, technology,culture,skills etc
8. Track performance
9. Project future cashflows based on how the portfolio has developed
10, Provide plenty of evidence to support a higher valuation to investors.

Few accountants can help with this.

We can.

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