It probably goes without saying that businesses with low competition are going to be more marketable and valuable than those with high competition. There are exceptions, though: Is competition limited because the sector is unattractive? Is it in a declining market which scares away would-be competitors? Is the business excessively risky?
Even if competition is currently limited, it may not contribute as much to marketability as a business owner might think. For example, if market conditions are ripe for attracting future competitors and there are low barriers to entry, business buyers may be concerned that there could be future erosion of sales and margins. If there is low competition in your industry, you will want to be able to clearly communicate the reason it will likely remain low. What are the barriers to entry? What would discourage new market entrants? What would continue to give your business a durable competitive advantage?
Perhaps there are ways to increase your business' differentiation, thus making it more unique. Are there ways you can add more value to customers - for example, you might make the best widget, but are there ways you can further add value to customers via an easier buying process, more convenient location, greater efficiency, more immediate delivery, nicer packaging or design, more eco-friendly, greater customization, offering more convenient ways to pay or finance a purchase, a subscription model, expertise or assistance, a more pleasant user experience, or providing valuable complementary products or services?
The more unique and differentiated your business is in ways that are valuable to customers, the more difficult it is for new market entrants to compete - and, if done in a way that doesn't decrease growth or profitability, it will improve your business' marketability and value when you are ready to exit.
Comments