October 25, 2022
Armed with superior knowledge about the customer base, an investor gains confidence, lowers risk, and increases negotiating leverage for pricing and terms prior to closing. Whether investors are PEs, VCs, searchers or strategic buyers, in-depth, objective customer feedback provides superior insight compared to filtered information from sellers.   
Over the years, performing hundreds of customer due diligence efforts, in diverse industries, we find investors ask us the same questions before we start work. In Customer Due Diligence Part I, we gave a peek inside the Mayfield process. Here, we expand on Mayfield Consulting’s strategies for achieving investors’ objectives.

  1. What knowledge do you need during deal negotiations and thereafter? 

Obviously, all investors want to know – is the customer base solid? That answer is usually based on satisfaction (“Sat”) and Net Promoter Scores (NPS). But we know every transaction is different. Therefore, Mayfield takes a deep dive based on the specific objectives of each investor.

We get at the core of sensitive details, such as:

  • What might make the target company’s customers switch vendors?
  • How hard is it for customers to switch suppliers?
  • How does the target company stack up against competition on key decision factors?
  • What additional products or services might customers be looking to purchase?

Women Hand writing What Our Customers Are Saying with black marker on visual screen. Isolated on white. Business, technology, internet concept. Stock Photo
We also cover topics that are more specific to the transaction at hand:

  • How is the target company unique compared to their competition?
  • Which features or functions of the product or service need improvement?
  • How important is a customer’s doing business with a minority-owned business for the product or service?
  • Are competitors offering something above and beyond your target company’s offering?

Investors tell us about their key concerns and strategies upfront, and Mayfield Consulting makes sure to address them.

  1. How many interviews are needed for you to gain confidence, that you know what is happening in the customer base?

Interviews needed can vary greatly. Evaluate the current customer base before deciding what a good sample size is.      

  • Size of the customer base – it could be 10-20 large customers or hundreds of small customers.
  • Group of people Segments within the customer base – are their distinct segments within the customer base, that may require different targeting and marketing strategies. Depending on the customer base, these could be by:
    • Industry or geography
    • Customer type, such as end users vs. distributors/resellers
    • Revenue type, recurring monthly revenue (RMR) vs. those that may have potential for RMR
    • Varying product or service usage


We recommend evaluating the current customer base before deciding on appropriate sample size. Oftentimes, investors say they only want feedback from the top 10 accounts. While these accounts are obviously important and a large part of the revenue stream, smaller accounts can represent huge revenue opportunities or be at risk. Overlooking feedback from many smaller accounts could be foolish.

It is also important to note that not every account or contact will be reachable. Contacts may leave the company or are out of the office or are too busy to respond. A customer list of two to three times the number of accounts you want interviewed is recommended.

  1. What do you learn from this in-depth customer feedback?


Immediately
– You learn about those accounts that are “at risk.” When a customer opens up about how unhappy it is and how easy it would be to switch, the investor is notified immediately. Occasionally, we have one of the largest accounts mention they are satisfied, but plan to switch to a company with a larger or more diverse offering. Once again, prompting Mayfield’s immediate communication to the investor.    

Weekly – If customers give “buy more” signals – Mayfield reports those weekly. There could be a need for additional products or service, or a change in demand due to critical business needs. Whoopee!!!

After all interviews are completed - and there are 8-10 completed interviews per segment - we run a Data Report of 10-15 pages:

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Mayfield’s analysis of this quantitative data reveals differences and commonalities across segments. This analysis is supplemented by comments that explain why customers in different segments behaved as they did. These comments are enormously valuable for understanding by target segment and guiding future initiatives:

  • Target marketing
  • Positioning and messaging
  • Product development
  • Future revenue forecasts


Conclusions and recommendations based on both quantitative and qualitative information, can even provide targets for salespeople after close, including:

  • Which are the accounts that are “at risk” and how to go after them
  • Which accounts are leads and what is the background that will help close the order


Please let us know if we can help with your customer due diligence.

 

Mayfield Consulting's team has hundreds of years of experience in sales and marketing, providing customer and market research, sales, marketing and PR strategy and implementation services performed by seasoned professionals on an affordable, a la carte menu to business-to-business companies. With a tagline of “Where Results Happen,” Mayfield Consulting clients have been named nine times in the last ten years to the Inc. 5000 List of America’s Fastest Growing Private Companies, won more than 50 awards, and experienced exponential growth.

Mayfield Consulting’s team has hundreds of combined years of experience in sales and marketing, providing market research, business due diligence, sales, marketing and PR strategy and implementation. All services are performed by seasoned professionals for business-to-business companies. Mayfield has special expertise in software, security, business services, financial services, and classic manufacturing industries. With a tagline of “Where Results Happen,” Mayfield Consulting has clients that have been named nine times in the last ten years to the Inc. 5000 List of America’s Fastest Growing Private Companies, won more than 50 awards, and experienced exponential growth.

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