Balance your portfolio!
New, high growth sectors can be really attractive to buyers; and big premiums are frequently paid for businesses that establish an early presence in these markets.
Typically, products and services pass through several stages in what’s generally referred to as the ‘product lifecycle’ – introduction, growth, maturity and, ultimately, decline (which is often brought about by advances in technology or changes in tastes and fashions).
Knowing where your products and services are in their lifecycles is really important, and it’s certainly something that buyers will consider; it’s unlikely that a buyer would offer a big multiple of your profit if what you’re selling is nearing the end of its road.
Now lifecycles for some products and services can be decades (hairdressers aren’t going anywhere soon!) whereas, for others, like hi-tech products, they can be incredibly short – which is why those companies need to keep investing in research and development to feed their product portfolio with a constant stream of new products to replace those that become outdated.
I’d urge you to look at the product lifecycle(s) for whatever you’re selling. Be honest with yourself and consider whether you’re over-dependent on products and services heading towards decline and, if you are, do something about it; look at bringing new products and services on board.