How a B2B Digital Transformation Increases Profits & Evaluations

Whether you’re looking to future proof your business, increase profit margins, and/or prepare to sell the company, investing now in a digital transformation (if you haven’t already) will have returns for your business well into the future.

In this instance we are looking at B2B companies. Businesses that have not gone through a “digital transformation” are still selling products via print catalogs, staffing customer service representatives to take orders over the phone, networking with new customers via trade shows, and using outdated, back-office systems that lower productivity. Meanwhile, those who have embarked on a digital transformation journey are reaping the benefits of doing things like giving buyers self-service portals, using online marketing tools, and integrating back-office operations via APIs. These businesses are experiencing significant increases in revenue, efficiency, and growth.

Accelerating Growth with Technology

Fully digitally-transformed businesses are using modern ERP, ecommerce and CRM systems to automate and streamline many business functions. The process involves employing best practices for managing customer, order and product data, which may include cleaning, normalizing, and adding data along with sharing data between systems. Most crucially, they have also developed a plan (or roadmap) and budget to continually improve upon and scale these systems.

So, what exactly are the factors of a digital transfomation that lead to long-term success? These 5 perspectives play a role:

    1. More Happy Buyers – the modern buyer doesn’t look like they used to, in fact 73% of B2B purchasing involves a Millennial. The new generation of buyers has expectations – they want to buy online, on their phones, whenever and wherever. They expect the process to be fast, easy and intuitive. Keeping this next generation of buyers happy should be every B2B company leader’s primary objective. Not doing so risks losing buyers to competitors who do.
    2. Reduced Overhead – Having a fully integrated digital B2B business allows for orders, processing, shipping and accounting to flow seamlessly, with much fewer manual inputs. This reduces errors and frees up empoyees to work on higer value tasks. Less overhead = higher profits.
    3. Increased Flexibility and Scalability – Company leaders will have more time to pursue new business. With this new digital flexibility, businesses can quickly adapt and scale to meet the needs of new business channels and expand within the market, increasing revenue and value.
    4. Higher Price Evaluation – There are private equity firms committed to buying “distressed assets” – often older legacy businesses that failed to meet the requirements of the modern digitally centric business world. These firms will then retool these businesses and resell them. Point being, a business that it not already using modern, best-in-class strategies, processes, and software will have a much lower valuation. For instance, a non-digital business with profits of $1,000,000 might only be evaluated at 2x profits or $2,000,000. The same business that has already undergone an investment in digital transformation might get an evolution of 4x or $4,000,000 because the buyers know that this is a business that can scale and/or easily integrate another business acquisition. If you are looking to sell, invest in the transformation before you sell in order to get the maximum value for your business.
    5. Reduced Headaches РOwners of digitally transformed businesses will learn the true value when reoccurring problems start to fade into the background. This will lead to fewer issues and more time to focus on business growth. Simply put, modernizing means fewer headaches and less stress.

February 3, 2024

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