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As a new buyer, you’re likely sorting fact from fiction, trying to understand how the business is performing in the market. The sooner you know how customers feel about your business, the faster you can prioritize your next steps and develop a strategic plan to grow the company. There are a few ways to approach this quickly and efficiently.
As a new buyer, you’re likely sorting fact from fiction, trying to understand how the business is performing in the market. The sooner you know how customers feel about your business, the faster you can prioritize your next steps and develop a strategic plan to grow the company. There are a few ways to approach this quickly and efficiently.
Begin by establishing a baseline that measures the business’s commercial performance. A widely accepted measure is the Net Promoter Score® (NPS®), a proven metric that evaluates the degree of loyalty existing today between the business and its customers. It’s a powerful tool. Conducting a Voice of the Customer (VOC) study and measuring the business’s NPS® will predict the likelihood for growth or decline in the short term. It’s one of the strongest leading indicators predicting commercial performance.
There are several factors to consider when implementing a smart customer survey intended to deliver meaningful insights and provide maximum benefit:
Improving customer loyalty is more than just a “feel-good exercise.” It’s common for a company that improves their NPS® to experience a doubling or even tripling in growth rate. The customer feedback is invaluable—pinpointing the key issues that will have the most significant impact improving loyalty if addressed.
Norwest Equity Partners (NEP), a middle-market investment firm, recently added a manufacturing company to their portfolio. Shortly after the deal was closed and new management was in place, the business embarked on an initiative to define a five-year strategic plan for profitable business growth. However, the challenge was that limited information existed on how the business was performing present-day.
Strategex was utilized as a third party to conduct a customer survey with the business’s top 50 accounts. The results were sobering. Some customers were delighted, while others were on the verge of leaving. Issues surfaced on several fronts. Lead times on filling orders were too long. Deliveries were often delayed. More importantly, customer service was poor. The basics—responding to requests and keeping customers informed of changes—were not standard procedure.
The net effect was an NPS® of 15%: a marginal score, reflecting a business with significant room to improve. Additionally, the results predicted that upside revenue growth was likely if fundamental business issues were addressed.
Management used this data to define a clear mandate for change across the organization. Employee meetings were held. Action plans were created. Customers were updated on the business’s strategy to improve.
Andy Cantwell, Principal at NEP, commented:
Looking out over the remainder of NEP’s ownership period, the upside potential is sizeable. With a current NPS® of 15%, an improvement of 15-20 points will predictably bring new business wins and accelerated growth. Consistent improvements can, over the course of five years, potentially double or triple the company’s growth rate compared with the purchase period. As growth increases, so does the value of the company.
Conducting Voice of the Customer research puts a business on the right track for growth. We've even created a shorter, quicker process to be implemented pre-acquisition to validate the strength of the deal, called Quality of Customers® research. By capturing this information, you’re creating a positive impression with customers that you’re committed to listening, learning, and improving. You’re building confidence by establishing a growth plan that responds to market needs and in turn creates top-line value. A focus on growth and improvement today can lead to a more lucrative exit strategy in the future.
Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld.
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Strategex's Private Equity Solutions offer a whole new approach to due diligence and value creation for private equity and investment professionals. We use customer insights, market assessments, and 80/20 to help our clients close with confidence, expedite growth, exit faster, and maximize MOIC.
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