A couple weeks ago I shared a post on company valuation – how to figure out what your company is worth to a potential buyer or investor.
We focused on customer value as a key driver. Sure, There’s a lot more to this than just customer value – some obvious and some not. And it has been done with a lot of success by work comp service providers…one is referenced below.
External factors such as interest rates, industry attractiveness (for some reasons work comp is kind of hot again), success of other investments in the space, Not much you can do about that – but there is a lot you can do to maximize the value of your customers.
A big part of that calculation is how long customers stick around – and how their “value” increases over time. Customer longevity – or lifetime customer value – is much more than how many cases you get per month times the price per case times the length of time you keep a customer.
In fact, that’s a very limiting way to view your customers, especially if you show that calculation to potential investors. Those investors want to see how you are going to manage, grow, improve your business. If you aren’t strategic enough to think about how you can deliver more to those customers so they drive more revenue, that isn’t going to impress smart investors.
Briefly, here’s a better way to think about customers…(thanks to Harvard Business Review)
Our customers become much more valuable when…
- they give us good ideas
- they evangelize for us on social media
- they reduce our costs
- they collaborate with us
- they try our new products
- they introduce us to their customers
- they share their data with us
Even if you aren’t going to be selling your company anytime soon, you should be thinking about this – a lot. A far-too-common mistake – and one I make all the time – is not focusing on the important stuff because I’m caught up in the urgent.
Final comment – the “old” One Call Imaging was very good at this. OCI got their customers to share data with the company so it could figure out where “leakage” was going, and then worked to identify why and where and who was involved. From there, OCI and their payer customers worked together to close gaps and plug the holes. This led to OCI dominating the workers comp imaging space for quite a while. It also maximized the company’s value when it was sold to Odyssey, and later when Apax bought the next gen OCCM.
What does this mean for you?
I don’t know ANYTHING more important than thinking about your customers – what do they want, why, how do they want to get it, what makes them successful, how you can help them be successful – all will help you determine where you need to go.