Trying to figure out exactly how much your business is worth can be complicated. Outside of a business valuation to estimate the economic value of your interest in the business, the process is often entirely subjective.
Different investors prioritize and covet some aspects of a company more than others. Yet while a majority of company valuations are decided based on hard assets, chances are they’re failing to account for one of your company’s single greatest assets: social media.
It’s time to factor your social media presence into the equation, and here are three reasons why:
As of 2013, “nearly one in four people worldwide” were using social media. It is projected that, “by 2017, the global social network audience will total 2.55 billion,” according to eMarketer. If your company is able to tap into even a minute fraction of that social digital population, corporate visibility will skyrocket.
Experts assert that a social media presence has the single highest impact on brand favorability. Why does social media increase the value of your company? Because acquirers are almost always going to pay more for a business that operates one or more recognizable brands. If you’re a small business without a lot of hard assets to speak of, creative assets of a strong brand will pick up a lot of slack when determining business value.
Lead (and Sales) Generation
Some old timers may find this hard to believe, but social media isn’t just a simple visibility exercise – it’s a serious sales generator. Only around 15 percent of companies actually quantify the ROI their social media activity generates (Moz). However, a few simple metrics can aid in effectively tracking social media engagement.
The goal is to get an idea of how your company’s content generates sales. The results might shock you. Over the course of two years, computing giant Dell declared $3 million in sales thanks entirely to Twitter (Socialnomics: How Social Media Transforms the Way We Live and Do Business)
In 2014, New England-based hotel chain Starwood traced approximately $2 million in sales from a single Facebook campaign (MavSocial). How will those sales increase valuations of your company? Many investors will use a discounted cash flow system in order to decipher how much your company is worth. The more sales earnings, the greater projected cash flow will be in years to come.
Social media isn’t about creating a one-way monologue – it’s about establishing a dialogue. Would-be customers are not interested in corporate advertisements. They talk back, and those conversations have the power to substantially increase your brand value and worth.
Social media is a fantastic way to improve overall customer service efforts. You can address customer queries, respond to complaints and gain positive customer reviews. Investors are monitoring your social media profiles and taking note of all of the above.
If customer engagement is lacking, it could impact your chances of making a repeat sale – thus hurting future cash flow projections. In turn, happy customers will almost always render a higher brand valuation.
You should never, ever neglect your company’s social media presence. Far too many startups stumble out of the gate when it comes to social media, and then give up just because they aren’t earning fifty followers a day.
It takes time to build up a decent social media following; however, that time investment will almost always pay off. A great social media presence increases your brand visibility, generates sales and demonstrates your company’s fantastic customer service abilities. If you ever consider selling your business, these three aspects may end up adding a couple zeros to its value.
This article has been edited and condensed.
James Howell is a senior manager at Rapid Formations, the UK’s top company formation agency. He manages the customer service team, and is also responsible for staff training, regulatory compliance matters and HMRC registrations. Connect with @rapidformation on Twitter.
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