10 Key Questions and Answers About SPACs
By Richard Harroch, Hari Raman, and Albert Vanderlaan SPACs, or “special purpose acquisition companies,” are continually in the business news these days, with $50+ billion having been raised by SPACs this year alone. In fact, SPACs are estimated to become 50% of the IPO market this year. The increasing popularity of SPACs and the flexibility […]

business meeting

By Richard Harroch, Hari Raman, and Albert Vanderlaan

SPACs, or “special purpose acquisition companies,” are continually in the business news these days, with $50+ billion having been raised by SPACs this year alone. In fact, SPACs are estimated to become 50% of the IPO market this year. The increasing popularity of SPACs and the flexibility they provide to companies wishing to go public has led to the formation of a number of high-profile SPACs.

SPACs provide the opportunity for private companies to go public in a manner different than traditional IPOs. SPACs also provide for significant incentives for their sponsors.

In this article, we answer 10 key questions about SPACs.

1. What is a SPAC?

SPACs are not new—they have been around for a long time and in the past were often referred to as “blank check companies.” A SPAC is a company that initially has no commercial operations and is formed solely to raise capital through an initial public offering (IPO). After the capital is raised and placed into an interest-bearing trust account, the SPAC seeks to acquire an existing privately held company, through what is commonly referred to as a “business combination.”

After a SPAC has raised its financing, it typically has two years to make an acquisition, subject to potential extension if sufficient SPAC stockholders vote to do so. If the SPAC is unable to make a deal within that time period, it has to return the money to its investors and the SPAC’s sponsor loses whatever initial investment it has made.

SPACs usually acquire privately held companies through a reverse merger, and the existing stockholders of the operating target company become the majority owners of the surviving entity. The end result is that the previously private company becomes a publicly traded company (sometimes referred to as a “De-SPAC transaction”).

SPACs offer private companies an alternative to the traditional IPO or direct listing route. SPACs can also allow for some shareholders of the target company to be bought out as part of the business combination.

2. What are examples of high-profile SPACs?

  • Billy Beane’s (of “Moneyball” fame) Red Ball Acquisition raised a $500 million SPAC focusing on the sports, media, and data analytics sectors, with a specific target of professional sports franchises.
  • Reid Hoffman (co-founder of LinkedIn) and Mark Pincus (founder of Zynga) raised a $600 million SPAC through Reinvent Technology Partners.
  • Shaquille O’Neal, Martin Luther King III, and former Disney executives announced the $250 million Forest Road Acquisition Corp. SPAC for deals in the tech and media space.
  • Chamath Palihapitiya (a prominent Silicon Valley investor) formed a $600 million SPAC called Social Capital Hedosophia Holdings, which ultimately acquired a 49% stake in the British spaceflight company Virgin Galactic.
  • Gary Cohn (former president and COO of Goldman Sachs and former President Trump adviser) raised $828 million through the Cohn Robbins Holdings Corp. SPAC.
  • Hedge fund manager Bill Ackman raised a $4 billion SPAC, Pershing Square Tontine Holdings.
  • A $3.7 billion SPAC merger was announced between health care technology company Clover Health and Social Capital Hedosophia
  • A $3.3 billion SPAC merger was announced between Diamond Eagle Acquisition Corp. and the combined entity of DraftKings, Inc., and SBTech (Global) Limited in a simultaneous three-party transaction.
  • A $1.2 billion SPAC merger was announced between Momentus, Inc. (a commercial space company offering in-space transportation and infrastructure services) and Stable Road Acquisition Corp.
  • Palihapitiya and Ian Osborne raised $2.4 billion through three SPACs (Social Capital Hedosophia Holdings Corp. IV, V, and VI) to effectuate business combinations in the tech sector, in offerings by Credit Suisse as sole bookrunner.
  • A $2.57 billion SPAC combination was proposed between E2Open (a supply-chain software provider) and CC Neuberger Principal Holdings.
  • A $1.3 billion merger was announced between Billtrust and South Mountain Merger.

We are seeing a number of serial issuers of SPACs who have successfully launched multiple SPACs and completed De-SPAC transactions.

3. Why are SPACs so popular right now?

There are a number of reasons SPACs have become popular right now, including:

  • SPACs allow privately held companies to go public in a faster manner than through the traditional IPO process.
  • SPACs can facilitate going public during periods of market instability and higher volatility.
  • SPACs are an additional way for companies to obtain late-stage growth capital, other than through private equity or venture capital financing (Mark Pincus has described SPACs as “venture at scale”). Additionally, SPACs offer the opportunity to essentially raise capital through common shares, rather than through preferred shares that may have significant down-side protections and control rights.
  • SPAC investors are allowed to exercise a redemption right if they don’t like the SPAC’s proposed acquisition.
  • There is more certainty around a company’s valuation and capital raise, compared to a traditional IPO, because the valuation is fixed through a privately negotiated merger transaction.
  • Public market valuations currently exceed private market valuations for a number of companies.
  • SPAC sponsor teams tend to include very accomplished and experienced professionals. This provides investors the ability to bet on a management team. Steve Fletcher, CEO of Explorer Acquisitions, an advisor and backer of SPACs, states: “With the recent proliferation of SPACs, we believe that investors will increasingly focus on SPACs that have deeply experienced and talented operating executives. These executives can truly help companies after the SPAC business combination.”
  • SPACs allow companies that might not otherwise be marketable through a traditional IPO to go public, such as companies with unprofitable operations or a complicated business history.
  • In traditional IPOs, only historical financial statements can be disclosed under securities law rules. But SPACs are able to market the business combination using forward-looking projections. Being able to set forth projections can be helpful for fast-growing but not yet profitable companies to tell their story to investors.
  • SPACs are more established and visible now, so investors are more receptive to SPAC offerings.

Karen Snow, SVP, Head of East Coast Listings and Capital Services at Nasdaq, which provides a number of services and solutions to SPACs, sums up the reasons for their popularity: “SPACs have evolved and are now considered a very viable alternative to accessing the public markets for many private companies. They have not replaced the traditional IPO, but because they have the ability to provide more flexibility, efficiency, and certainty, they have certainly earned their place as an alternative.”

4. How is the initial SPAC IPO structured?

  • As with any IPO, the SPAC sponsor files a registration statement with the SEC on Form S-1. The registration statement is relatively simple compared to traditional IPO registration statements, since the SPAC has no operational business or detailed financial statements.
  • The SPAC negotiates underwriting and ancillary agreements, including a trust agreement governing the proceeds raised in the IPO.
  • After SEC clearance, there is a roadshow to interested investors where the SPAC’s management team presents its vision for the SPAC. The management team sells themselves and their experience, rather than a specific business operation.
  • The SPAC typically offers units comprised of one share of common stock, plus a fractional warrant to acquire common stock at a price of $10 per share. The warrants are an upside enticement for investors and trade separately from the common stock.
  • If the SPAC is successful in its fundraising efforts, the capital is placed into a trust until the sponsor decides what company or companies to acquire, or used to redeem shares issued in the IPO.
  • If the SPAC needs additional capital to complete an M&A agreement to acquire the business or assets of a target company, then the SPAC may obtain the additional capital (debt or equity) from the sponsor or through a PIPE (private investment in public equity) from additional investors.

5. How are SPAC sponsors compensated/incentivized?

The sponsor will typically purchase founder shares prior to the SPAC IPO filing. The sponsor will pay a minimal amount (e.g., $25,000) for the founder shares. The founder shares are sometimes referred to as the “promote.”

When the SPAC consummates its business combination with a target company, the founder shares typically convert into public shares, with the sponsor’s shares significantly diluted in the combined business.

The sponsor is also typically issued founder warrants to acquire additional shares.

The founder shares and warrants act as incentives to the sponsor to grow the business and increase the value of the shares.

Some SPACs are now being structured to reduce the sponsor’s promote interest or provide alternative incentives for the sponsor. For example, some SPACs provide that the promote is tied to maintaining or growing the SPAC’s share price.

The sponsor does fund the SPAC’s operating capital needs at the beginning, typically in return for private placement shares or warrants, which often runs into the millions of dollars. The sponsor thus bears the risk of losing this investment if a successful transaction does not occur (this is commonly referred to as the sponsor’s “at risk capital”).

6. How do SPACs target companies to acquire?

Once the SPAC has successfully completed its IPO, the sponsor can begin the search for a target company to acquire. Here are some of the criteria they employ in their deal search:

  • Deal size. Under stock exchange rules, the business combination must be with one or more targets that together have an aggregate fair market value of at least 80% of the assets held in the SPAC’s trust account (excluding certain items). To mitigate the dilutive impact of the 20% founder shares and make a De-SPAC transaction more attractive to a target, SPACs often prefer business combination targets that are four to eight times the SPAC size.
  • Industry. Most SPACs specify an industry or geographic focus for their target business combinations (e.g., tech sector, media industry, fintech, enterprise software).
  • Upside Potential. SPACs, like any other M&A buyer, seek to combine with targets that the sponsors believe have meaningful upside. This year, SPACs have increasingly focused on emerging growth companies that are relatively earlier stage than traditional IPO companies.
  • Financial Statements. The SEC proxy rules require that a proxy statement include two or three years of financial statements of the target, plus interim financial statements. The financial statements and the target’s auditor have to meet certain requirements, and thus the necessary audit or re-audit of the target’s financial statements can be a gating item for the business combination.
  • Public company readiness. It is important that the target company and its financial controls are ready to handle the rigor of being a public company with periodic reporting requirements.
  • Market Opportunity. SPACs will look for targets whose business has a large market opportunity.
  • Quality Management Team. The quality of a target’s management team will be an important factor for the sponsor.
  • Due Diligence. The SPAC will do extensive due diligence on the target company, similar to due diligence in M&A or IPO transactions.

7. What are the key negotiating issues between a SPAC and a target company?

  • Valuation. Valuation of the target company in a SPAC combination is subject to negotiation. But since SPAC shareholder approval is necessary for the combination and SPAC shareholders may elect to redeem, the valuation must be viewed as appropriate by those shareholders or the deal could result in increased redemptions and therefore less operating cash for the go-forward company.
  • Sponsor Equity. A SPAC sponsor/management team typically starts with a 20% equity in the SPAC (plus its at-risk equity stake), but gets diluted down after the business combination. In some instances, the SPAC sponsor/management team may give up some of their equity interest to further entice the target selling company or an additional financing source for the deal. For example, the SPAC sponsor will often agree to revise the percentage of its promote based on trading price and the amount of capital raised in the transaction (after redemptions).
  • Employee Incentives. How will management/employment incentives be structured? Will the target company’s stock option plan be assumed by the SPAC? In addition, will a new equity plan be adopted on a go-forward basis? Is there accelerated vesting of some or all outstanding stock options of the target company for the benefit of the option holders?
  • Deal Certainty. Will the sponsor backstop any financing shortfall for the business combination or will a PIPE be committed to cover the shortfall? Will the SPAC or target boards of directors have the contractual right to make a change in recommendation for the merger transaction if their fiduciary duties are deemed to require doing so (i.e., does a change in circumstances allow either party to walk away from the deal)?
  • Reps and Warranties. Both the SPAC and the target company will be expected to make a number of representations and warranties about its formation, good standing, financial statements, liabilities, intellectual property, key contracts, and a host of other items.
  • Deal Certainty. Will the sponsor or the SPAC agree to reimburse the target company if SPAC shareholder approval is not obtained? This is rarely ever negotiated by the target in the current SPAC environment, since the SPAC cannot access the trust funds and the sponsor will be wary of backstopping this commitment, but this may be a point to watch in the future.
  • Closing Conditions. What are the key closing conditions to the SPAC business combination? Typical conditions include shareholder approval, no material adverse effect on the target, and any required regulatory approvals. In addition, most agreements include a minimum cash condition in favor of the target if a threshold amount of capital is not raised in the transaction.
  • Registration Rights/Registered Shares. Will the target shareholders receive registered tradable shares or only registration rights? What lock-up on trading of target shares will be imposed?

8. What happens after the SPAC enters into an agreement with a target company?

Here are the key steps after a definitive acquisition agreement has been entered into with a target company:

  • The SPAC files a proxy statement/Form S-4 registration statement with the SEC and awaits approval.
  • Following SEC clearance, the parties solicit the vote of their shareholders to approve the acquisition.
  • SPAC shareholders can turn down the proposed transaction or the shareholders can demand redemption of their stock if they don’t like the proposed deal (noting that a SPAC shareholder can both approve the deal and redeem its shares).
  • The SPAC may raise additional financing from existing or new investors in a PIPE transaction. The PIPE can work as an “anchor investor” and a valuation validation of the business combination. In some recent transactions, the amount of PIPE proceeds has been significantly larger than the amount of funds in the SPAC’s trust account; this results in much more closing certainty for the target.
  • Once approved by the companies’ respective stockholders and all other conditions of the merger agreement are satisfied, the merger is effected and the stock ticker for the SPAC changes to reflect the name of the acquired company.
  • The stock of the SPAC starts trading on an exchange (NYSE or Nasdaq typically) as a public company.

9. What are the key legal issues that arise in SPACs?

There are a number of important legal issues in SPACs, including:

  • Securities Laws. The SPAC has to comply with securities laws in connection with its S-1 registration statement filed with the SEC.
  • Proxy Statement. On the business combination with the target company, the SPAC has to file with the SEC a proxy statement soliciting shareholder approval. Lawsuits have been brought against SPACs alleging deficiencies and misstatements in the proxy statement.
  • D&O Insurance. The SPAC will want to obtain appropriate Director’s and Officer’s insurance coverage, with limited exclusions.
  • Projections. The projections offered about the target business need to be carefully prepared and caveated.
  • Protections for Directors and Officers. Appropriate protections for directors and officers need to be built into charter and indemnification agreements.
  • Key Contracts. Key contracts of the target company need to be reviewed to ensure that the business combination doesn’t trigger anti-assignment provisions.
  • PIPE Offering. The terms of any associated PIPE offering are carefully documented with the various rights and obligations of the parties.
  • Board Makeup. Various laws and corporate governance listing requirements of the NYSE and Nasdaq will typically require that independent directors comprise a majority of the Board. These also require an Audit Committee and Compensation Committee made up of independent directors.

10. What are the risks associated with SPACs?

There are a number of risks associated with SPACs, including:

  • The SPAC may not find a suitable business combination within the required time period (typically two years, with some extensions up to 18 months or three years), and investors’ monies will be tied up for that period. In the low-interest-rate environment we are currently in, the lost opportunity cost of the capital being tied up has been reduced. Generally, investors are seen to also be compensated for this opportunity cost by both the warrants and by having optionality on the De-SPAC transaction if the stock price trades up on announcement.
  • There is a concern that because the SPAC sponsors need to do a deal, they may overpay for a target business combination, although this risk is mitigated by the fact that if investors don’t like the target combination, they can redeem their shares.
  • Ultimately, like any public company stock, performance issues can adversely affect the stock price, which is often further magnified in cases where the target may be an early-stage company that has not been conditioned to report results on a quarterly basis.
  • Litigation risk is present as recent cases have demonstrated. See, for example, Bogart v Israel Aerospace Indus., Ltd. (standing of SPAC sponsor to bring a claim for breach of duty to act in good faith); Rufford v. Transtech Serv. Partners, Inc. (challenge to fees being paid to SPAC sponsor); Welch v. Meaux (alleged securities fraud in connection with SPAC business combination); and Olivera v. Quartet Merger Corp. (SPAC shareholder suing SPAC for failure to honor his redemption right).
  • The target company runs a risk that it spends a great deal of time, effort, and legal fees in negotiating a deal with a SPAC, but then the SPAC shareholders don’t approve the deal, a related PIPE financing can’t be raised, or, more commonly, that the SPAC shareholders redeem a significant portion of the funds in the trust account.
  • A target company just may not be public company ready due to lack of adequate internal controls or SEC required financial statements. This is a key issue to flush out early on in consultation with the target company’s auditors.
  • Projections are typically included in the business combination shareholder solicitation, and the company runs the risk of litigation in the event projections are missed.
Related Articles:

Copyright © by Richard D. Harroch. All Rights Reserved.

About the Authors

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a venture capital fund in the San Francisco area. His focus is on Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on start-ups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of a 1,500-page book by Bloomberg: Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements. He was also a corporate and M&A partner at the law firm of Orrick, with experience in start-ups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 500 startups. He can be reached through LinkedIn.

Hari Raman is a partner at Orrick, Herrington & Sutcliffe in San Francisco, working in the firm’s Corporate, Global Mergers & Acquisitions and Private Equity practices. Hari represents public, private, emerging, and late-stage technology companies, as well as private equity firms in a variety of domestic and international transactions. His experience spans the range of M&A activity, include many cross-border deals, de-SPAC transactions, majority/minority investments, restructurings, and general corporate matters. He works closely with serial acquirers implementing their buy-side M&A strategies, and with venture-backed companies, founders, and investors in M&A exits and other liquidity transactions. Hari has also previously worked in Asia and the Middle East on complex, cross-border M&A, and leverages that experience in leading tech-focused M&A transactions across the globe, including China, India, Israel, and the United Kingdom. He can be reached through www.orrick.com.

Albert Vanderlaan is a partner in Orrick, Herrrington & Sutcliffe’s Technology Companies Group, based in Boston. He works with public and private companies, venture capital firms, and investment banks focused on the life sciences and high-growth technology sectors. Albert is involved in a broad range of corporate legal engagements for high-growth technology companies, including venture financings, public offerings, private and public company securities law compliance matters, de-SPAC transactions, public company disclosure obligations, mergers and acquisitions, and COVID-19-related matters (including public company disclosure obligations and PPP eligibility and compliance matters). He also regularly advises private and public companies and their board of directors on corporate governance issues. Albert’s clients include private and public companies in the life sciences, real estate, finance, automotive, and Internet-related industries. He also represents underwriters in initial public offerings, follow-on offerings, and PIPE offerings, and venture capital firms in a variety of investment transactions. He can be reached through www.orrick.com.

The biggest problem founders and small business owners have is that they’re experts in their field and novices in what it really takes to effectively run a business. That’s what usually trips them up, sooner or later.

Don’t let that happen to you. Admit that you don’t know what you don’t know about business, starting with these 15 tips guaranteed to help keep you and your company out of hot water. Some are straightforward, others are counterintuitive, but they’re all true. And some day they’ll save your butt.

Always make sure there is and will be enough cash in the bank. Period. The most common business-failure mode, hands down, is course out of cash. If you know you’ve got a cash flow or liquidity problem coming up, fix it now. You can’t fire bad employees fast enough. You just can’t. Just make sure you know they’re the problem, not you ( see next tip ).

The problem is probably you. When I was a young manager, my company sent us all to a week of quality training where the most important concept we learned was that percent of all problems are management problems. When things aren’t going well, the first place to look for answers is in the mirror.

Take care of your stars. This goes for every company, big and small. The cost of losing a vedette employee is enormous, yet business précurseurs rarely take the time to ensure their top performers are properly motivated, challenged, and compensated. Your people are not your kids, your personal assistants, or your shrink. If you use and abuse them that way, you will come to regret it. Capiche ?

Learn to say ' yes ' and ' no ' a lot. The two most important words business owners and founders have at their disposal are “yes” and “no. ” Learn to say them a lot. And that means being decisive. The most important reason to focus – to be clear on what your company does – is to be clear on all the things it doesn’t do.

It boggles my mind how little most créateurs d'entreprise value their customers when, not only are their feedback and input among the most critical information they will ever learn, but their repeat business is the easiest to get. Learn two words : meritocracy and nepotism. The first is how you run an organization – by recognizing, rewarding, and compensating based solely on ability and achievement. The deuxième is how you don’t run an organization – by playing préférés and being biased.

Know when and when not to be translucide. Transparency is as detrimental at some times as it is beneficial at others. There are times to share openly and times to zip it. You need to know when and with whom to do one versus the other. It comes with experience.

Trust your gut. This phrase is often repeated but rarely understood. It means that your own instincts are an extremely valuable decision-making tool. Too often we end up saying in retrospect and with regret, “Damn, I knew that was a bad idea. ” But the key is to know how to access your instincts. Just sit, be quiet, and listen to yourself.

Protect and defend your intellectual property. Most of you don’t know the difference between a copyright, trademark, trade secret, and patent. That’s not acceptable. If you don’t protect and defend your IP, you will lose your only competitive advantage.

Learn to read and write effective agreements. You know the expression “good fences make good neighbors ? ” It’s the same in business. The more effective your agreements are, the better your relationships will be.

Far too many créateurs d'entreprise run their like an extension of their personal finances. Bad idea. Very bad idea. Construct the right entity and keep it separate from your personal life. Know your finances inside and out. If you don’t know your revenues, expenses, capital requirements, profits ( gross and net ), debt, cash flow, and effective tax rate – among other things – you’re asking for trouble. Big trouble.

You don’t know what you don’t know. Humility is a powerful trait for précurseurs, and that goes for new business owners, veteran CEOs of Fortune 500 companies, and everyone in between. More times than not, you will come to regret thinking you knew all the answers. Behind every failed company are dysfunctional, delusional, or incompetent précurseurs. The irony is, none of them had the slightest idea that was true at the time. Even sadder, most of them still don’t. Don’t end up like one of them.

For every success you have in growing your market share, another or other businesses will inevitably lose ground. Here are 11 quick and easy tips to gain a competitive advantage over your rivals and insulate yourself from the threat of new entrants in the market.

Of course, we all want to spark growth and increase revenue. But the way you do this in a sustainable way is to focus instead on the building of a loyal database of avid fans. Content digital, paired with optimized website forms and compréhensif fax automation follow-up is critical to business success. This approach builds trust by giving away free value before asking for someone’s hard-earned money. Not an expert in creating optimized lead generation pages on a website ? No worries, use a trusted tool like Leadpages to make it happen.

Like it or not, folks out there aren’t searching for your brand, they’re just looking to solve a problem or find a particular type of product ( unless you run Starbucks or Adidas ! ) Don’t list all the benefits your product brings. Focus on the solutions. Explain to the customer in simple, straightforward terms how or why your product can help them or assist in the attainment of their goals. Consider FedEx’s iconic slogan : When it absolutely, positively has to be there overnight. This was a clear example of addressing widely-spread anxiety about the reliability of delivery services. Run through some market research to profile your target customer. How does your product or service – and your delivery and and price point – solve other people’s problems and make their lives easier or more pleasurable ?

Dropping prices doesn’t necessarily raise sales, for instance ( though it will definitely squeeze margins ). If you position yourself as a premium brand, then your customers aren’t necessarily value-driven in the first place, and cutting prices could even tarnish your brand. Consider this case study from Robert Cialdini’s seminal book ‘Influence : The Psychology of Persuasion’ : a jeweller sold out of turquoise jewelry after accidentally doubling, instead of halving, the price. The inflated price tag lent the product an unwarranted cachet ! If you are a de haute gamme brand, there are ways to optimize your pricing without lowering prices. For example, offer the quality-conscious customer an ‘exclusive’ benefit that your rivals do not or cannot provide. If you are at the value-driven end of the market, on the other hand, don’t assume slashing prices means incurring a loss. Low pricing can help you rapidly onboard a heap of new customers who may also buy other items in your shop and return again. Context also counts for a lot with pricing. The best way to sell a $5, 000 watch, for instance, could be by putting it next to a $10, 000 watch. Think strategically when it comes to deciding any price point.

Yes, it sounds obvious, but it’s so very important ! Whether consciously or not, people are more likely to buy a product if they like the sales assistant who’s attending to them. While the employee’s personality obviously has no bearing on the price or your product’s ability to serve their needs is irrelevant. Friendly customer-facing staff will always attract more sales. Be rigorous in hiring people who are genuinely cheerful, friendly and outgoing. Make sure your training program teaches them to adopt a consistently friendly approach that puts customers at ease and feel like a priority.

Say you’re a bricks-and-mortar store and you’re getting a rush of customers as closing time approaches… why not close up an hour later ? While this may cause disgruntlement among équipe, solve this issue by getting creative with rosters. Monitor customer footfall throughout the day and week to identify your busiest periods, and staff people accordingly. You can also reduce headcount during quieter periods to offset the higher costs and longer working hours created by your extended opening hours. It’s a win-win !

Even in the digital age, some customers will always prefer to contact you by phone rather than fax or Facebook. While many online companies with tight margins eschew manned phone lines altogether, it’s worth giving customers the option of having a voice-to-voice conversation with your brand. By all means, slash the time and cost spent responding to queries by funnelling customers to standardized, pre-existing responses on your webpage ( i. e., FAQs ). But if their query isn’t listed in the drop-down menu of FAQs, then don’t make them click more than once more to find your phone number. Put it front and center on your web page, particularly if you’re a retail offering. ‘Live chat’ bots are an inexpensive way of offering real-time communication, too.

Why not give your happy customers a voucher with their purchase to redeem on your products and services ? If they love what you do already, they’re only going to love you more for this. It’s good for you because : It guarantees they will return to your store again. People hate to waste freebies ! When they return to your store to redeem their voucher, they may buy other items, too. If your operates online, then the freebie could be strategically timed to coincide with a special sale. Oh, and guess what ? Chances are customers who have received vouchers or freebies won’t stay quiet about it either, so you could enjoy some positive buzz on social media.

Local businesses can arguably connect with their unique communities with much greater authority than any global chain. A local retailer, hair mobilier or gardening company can sponsor a kid’s sports team and offer deep discounts for OAPs at the same time. Some cinemas feature special ‘sensory’ screenings where parents can bring kids with autism ( who would normally be overwhelmed by busy, noisy environments ) to enjoy a movie in a relaxed, stress-free atmosphere. This reflects well on them and also guarantees them a loyal customer niche. Whatever you choose to do to support your community, make sure it authentically fits with your brand offering and business journey to date.

Social media is a great medium through which to build a solid relationship with customers – just don’t forget what ‘social’ actually means ! Soul-less corporate shop-talk won’t work on Twitter. Try to give your brand some ‘personality’ when you write updates or posts. This can bring its own risks, of course. But if you get it right, the benefits can be très grande. Develop a tone of voice that aligns well with your brand identity. Seek to inform, help, entertain or amuse. And most importantly – given the dire PR consequences – don’t patronize, try too to be funny, or tweet after a few alcoholic drinks !

Sometimes it’s better to be a master of one discipline than a jack of all trades. Admittedly, multiple revenue streams do spread your risk : if one falters, others can take up the slack. Nevertheless, consumers often associate ‘specialists’ with higher quality products or services than generalists. And with good reason, too : specialists typically invest all their resources into perfecting a solo product or service. So what should you specialize in ? tera state the obvious, it should be something in which you excel. You could also pick something with rising or recession-proof demand which is resilient to technological change in which you possess a competitive advantage over your rivals or where there’s an obvious gap in your local market. Own it, whatever you do.

Don’t ever get too satisfied with your . You can always improve – and improve you must ! Don’t get me wrong : without the odd moment of smug satisfaction, what’s the point ? Do relish in the successful launch of a game-changing product or take pleasure in positive customer feedback. But don’t let your customers hear you banging on about it time after time ! Be alert to the common element that has led to the downfall of countless hitherto thriving brands : complacency. Imaginative, nimble and innovative start-ups often do better than big market leaders that just got lazy. You may be the disruptive innovator today, but tomorrow you could be the complacent market leader with a tired business model. So try to be humble and always strive to improve. Seek inspiration from other créateurs d'entreprise, from books and from seminars. The moment you think ‘mission accomplished’ is the same moment you become vulnerable to being usurped.

There are lots of ways in which you can improve your , and not all of them are complicated ! Try out the above business tips or integrate them with your existing strategies, and let me know how you go in the comments below. Guest Author : Faye Ferris is responsible for the day-to-day management of the Dynamis APAC Pty Ltd offices in Sydney. She develops the DYNAMIS stable of brands and their expansion into the Asia Pacific region as well as BusinessesForSale. com, FranchiseSales. com and PropertySales. com. If you have an interest in partnering up with Faye or advertising on any of these websites in the APAC territories, please do not hesitate to contact her on faye@businessesforsale. com.


Leave a Reply

Your email address will not be published. Required fields are marked *