What Investors Look For: Future-proof your Customer Base
When choosing where to put their money, investors want to know that not only are the number of customers you’re serving are growing, but also that they are well diversified and are being properly serviced. In order to improve an investor’s valuation of your business, you’ll want to make sure you are able to answer all of the questions below and take action if there are weaknesses.
Segment your Customers
The first thing investors want to know is how large is your customer base, where are they, and how fast are they growing. You should have your customer segments broken down by product, location and industry (if applicable). They will want to see information on customer acquisition, retention and churn for each of these segments, and see if some segments being overlooked or neglected. You should also provide some information on what marketing & sales channels are used to serve and attract customers.
Identify your largest clients
In addition, they’ll want to know which segments are growing fastest and which ones are struggling. This will also enable them to see if your customers are well diversified. If 80% of revenue is coming from 20% of your customers, you will have big problems if one of those customers decides to leave. They want to easily identify areas of your business that look saturated and areas they could improve upon. They will also want to see the contracts from these large customers to make sure they are secured long-term.
Explain your industry
Investors will want to try and understand the size of the opportunity. This means figuring out the size of the market for your products and identifying your competition. You may want to compile some research on the macroeconomic conditions of your industry and the geographical areas you have a foothold in, and how future events could affect your customer segments. In the event of unfavourable market conditions, they will want to make sure you have a plan for how to weather the storm.
Analyse your Competitors
Understanding how your business compares to the competition is vital to an investor because it gives them a good idea of your strengths and vulnerabilities. They want to make sure you have a competitive edge, and that you have unique relationships with your customers. By comparing your customer growth, diversity and churn to other companies in the industry, they can get a clear idea of where you’re performing well and where you’re struggling. Having this information available to investors ahead of time will not only help speed things along, but also help you strengthen these areas ahead of time.