The connection between your customer and your business valuation is frequently overlooked.  (For purposes of this post, I’m specifically referring to your customer as the end-user of your product.)

Your customer can provide information about:

  • how your products are used;
  • how your products are perceived;
  • how your products provide value.

Without this information you can’t evaluate many of the business opportunities that would enable you to grow and scale your business.  And if you’re not maximizing the opportunities to grow and scale your business, then your business valuation suffers.

But, if you understand your customer you can maximize your revenue potential and operating margins. You can then maximize your company’s growth and scalability potential.  Because by understanding your customer you can:

  • Build your client base;
  • Create new revenue streams;
  • Evolve your product;
  • Diversify your product offering;
  • Decrease the cost of supporting customers;

Your customer provides the means to identify new business opportunities.  New business opportunities can take the form of evolving product families, new product lines or even new markets. And if you leverage new business opportunities you can increase your revenue.

Understanding your customer also enables you to identify and resolve any issues your customer experiences when buying, receiving or using your product. And if you resolve or minimize the issues your customer experiences then you decrease the burden on customer support/client services.  And if you decrease your customer support efforts you decrease your support costs and increase your margins.

Knowing your customer means you have a detailed end-user profile. The end-user profile offers insight so that you can better market, sell and support/service your product offering to current users or additional user types that share characteristics with your end-user profile.

You can create a profile of your end-user if you know things about your customer such as:

  • how your product is used;
  • who makes the purchasing decision;
  • how a purchasing decision is made;
  • what events your customer attends;
  • what media your customer follows;
  • how your customer’s business operates (in the case of business customers).

I recently wrote about the problems RIM is facing in: RIM WAS way ahead of the game, did it just stop playing?.  Last week the Boy Genius Report (BGR) published what was reported as an anonymous open letter from a RIM employee to the Senior Management Team at RIM.  (BGR has confirmed that the source is a RIM employee.)  The letter is a plea to RIM’s Senior Management with recommendations on how to resolve the issues the company is facing.  The very first recommendation is for RIM to focus on the end-user.

Below are some excerpts from the “Focus on the End User experience” portion of the letter. (The letter can be read in its entirety at BGR)

1) Focus on the End User experience

Let’s obsess about what is best for the end user. We often make product decisions based on strategic alignment, partner requests or even legal advice — the end user doesn’t care.

Let’s start an internal innovation revival with teams focused on what users will love instead of chasing “feature parity” and feature differentiation for no good reason (Adobe Flash being a major example). When was the last time we pushed out a significant new experience or feature that wasn’t already on other platforms?

…we should encourage key decision makers across the board to use these products as their primary device for a week or so at a time…This way we can understand why our users are switching and get inspiration as to how we can build our next-gen products even better! It’s incomprehensible that our top software engineers and executives aren’t using or deeply familiar with our competitor’s products.

The above excerpts underscore the importance for any company to know their customer.  So that even big companies, even profitable companies, even established companies experience a hit on valuation if they don’t focus on their end-users.

  • If you want to understand how your product is being used, speak with your customers.
  • If you want to understand opportunities for additional revenue streams, speak with your customers.
  • If you want to understand how your product offering is being perceived, speak with your customers.
  • If you want to remain competitive, speak with your customers.

Too often guesswork and assumption form the foundation for companies when they’re making decisions related to their product offering.  Don’t guess what your customers need or want, find out.  Speak to them, communicate with them and connect with them.

Whether it’s about the production or development, marketing or selling, or even the servicing or supporting of your product offering you need to know your end-users.  You need to know your end-users to fully identify and leverage opportunities to grow your revenue and your margins. If you don’t your business valuation will not be maximized.