Business Specialization is Key to Your Company’s Valuation

Tetris-style color blocks illustration business specilization

Business specialization comes in two forms: specializing in one product or service and specializing in one industry.  

Specializing in one product or service allows you to focus on delivering that thing better than everyone else. It enables you to hire (or train) specialists in your field, improving the quality of your work, which leads to happier customers. And satisfied customers buy again and refer their friends.  

That’s why specialists often grow faster even while they’re spending less on marketing. This can lead to better profit margins and, ultimately, a more valuable company. Specializing in a specific product or service has tremendous benefits, but what if your customers expect you to deliver a range of offerings? 

That’s when the second form of business specialization can help: focusing on a specific industry. 

Maximum Possibilities partners with you and guides you through the minefield of business decisions. Often the first step is even knowing what questions you should be asking. Just as you must become a specialist in your specific industry, we have become specialists in growing businesses. Let’s look at the benefits of business specialization.  

Becoming an Industry Expert 

Specializing in serving a specific industry confers several benefits. First, offering your products or services to one industry allows you to learn the language spoken in that sector. Every industry and profession has a unique language, and being able to speak the jargon can benefit your company. Knowing your industry’s lingo can indirectly communicate to your customers that you’re experienced, knowledgeable, and able to navigate the space.  

Furthermore, focusing on one sector ensures you stay current with industry trends. The result is that your company will be able to identify new opportunities for your customers sooner than a competitor who serves multiple industries.   

Most importantly, specializing in one industry allows your employees to become experts in a sector. You may be an expert in an industry, but chances are, they’re not (particularly when you first hire them). Focusing on a sector accelerates how quickly your staff can become fluent in your industry’s lexicon. Once they are this allows you to delegate customer relationship management faster and more successfully.  

Specializing in an Industry Led to a 20x Increase in Revenue 

Let’s look at the story of UK-based founder Raman Sehgal and how business specialization helped him not only grow but sell his business.  

Sehgal started a small marketing agency called ramarketing in 2009. By 2015 the business had grown to approximately $500,000 in revenue, but the company was losing customers as fast as they were winning new ones.  

Frustrated with his company’s lack of progress, Sehgal decided to do a complete analysis of his business. He found that ramarketing’s most valuablecustomers (low maintenance, sticky, high gross margin, etc.) were in thepharmaceutical industry. Sehgal decided to pivot his business to solely serve clients in the pharmaceutical supply chain.  

Beginning to serve one industry created a sequence of positive events for ramarketing.  

Becoming an industry specialist allowed ramarketing to stay up to date with industry trends, learn the lingo, and ultimately improve the quality of their work. An increase in customer satisfaction led to more referrals and a strong reputation in the sector.  

His employees also began to understand the intricacies of the industry. In the pharmaceutical space, there are many rules and laws to adhere to. Understanding the regulations allowed Sehgal’s employees to better serve their customers.  

Subsequently, the business boomed.  

The Proof is in the Pudding 

Sehgal’s once stagnant marketing agency grew from $500,000 in turnover in 2015, to over $10 million by 2022, which is when Sehgal accepted an acquisition offer from NorthEdge Capital of more than 10x EBITDA.  

Sehgal’s bold decision to specialize in the pharmaceutical industry led to a 20x increase in revenue and, ultimately, a lucrative exit. 

Reach Your Maximum Potential with Maximum Possibilities 

Are you ready to look towards the future and ensure your company’s valuation is secure?  

Narrowing your product or service line is the most common way to increase your company’s value. Specializing in one industry carries many of the same benefits. 

If you’re interested in ways to make your company more valuable, let’s Schedule a call today. Maximum Possibilities is here to help you discover and enhance your company’s valuation, so it reaches its maximum potential.  

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