How We Will Increase Asset Value to USD 2M Within 3 Years for My Client's Small Construction Business Based in Nairobi: A Prospective Case Study

I'm currently working with a client who owns a construction business based in Kenya. One of our primary goals is to double our revenue over the next 18 to 24 months.

Although his exit plan is to eventually leave the business to his children, he wants to ensure that it is in excellent shape before doing so.

Our measure of a business being in good shape is how sellable it is, so we are running it as if we are going to sell it.

Goals

Our key objectives are:

• Increase monthly net income to an average of USD 50,000.
• Position the business to trade at a 3X to 5X multiple, potentially valuing the business at USD 1.8M to USD 2.4M within three years.
• Reduce client concentration risk to less than 25% per client.
• Increase revenue predictability by setting up 3-4 reliable customer acquisition channels.

Customer Segments

Our best clients are private developers with long-term, multi-location projects. However, they currently make up less than 5% of our client base.

Our most common clients are new high-end or luxury business owners, often for quick, non-recurring projects. While we charge premium prices, the customer lifetime value (CLV) is low, and customer acquisition cost (CAC) is high, making advertising unsustainable.

To address this, we plan to:

• Redirect sales efforts towards larger clients.
• Collaborate with complementary service companies such as architects, real estate agents, and consultants.
• Eliminate non-repeat, non-recurring customers below a certain deal size.

Marketing Channels

Currently, most of our clients come from word-of-mouth referrals and our social media presence.

We run weekly awareness campaigns with paid ads, and about 25% of our clients come from social media.

However, we need to increase our advertising volume to scale our reach.

Current Challenges

1. Targeting Quality Clients: Our target market consists of high net worth individuals who tend to be very private and difficult to access.
2. High Churn Rate: Over 90% of our projects are one-time deals.
3. Key-Man Risk: Currently, the business is built off the back of the founder’s skills set and connections. When he leaves, it will take a massive hit.
4. Talent Acquisition: Finding good talent is a long-term challenge. It is both time consuming and expensive.
5. Financial Records: The business lacks comprehensive financial documentation. . ?Clear and accurate financial records are crucial for demonstrating the business’s value; it is difficult to determine the value of a business that has shoddy books and no documentation.

Proposed Solutions

To overcome these challenges, we will:

• Develop relationships with private developers for multi-year projects.
• Grow the management team to reduce key-man risk, using Standard Operating Procedures (SOPs) to document workflows.
• Implement recruitment software to streamline talent acquisition and dedicate resources to leadership development.
• Ensure we have at least three years of healthy financial statements, including income statements, balance sheets, and cash flow statements.

Intangible Assets

There are certain assets that a business has that will not show up on a balance sheet even though they significantly increase its value. We call these ‘intangible assets.’

For example, if a company was to be bought at a 2X multiple, being able to demonstrate employee loyalty, or having a database of 50,000, names might increase that multiple to 4X, effectively doubling the business.

For this business, the intangibles I will be developing are as follows:

• ?Employee loyalty
• Relationships with suppliers
• Relationships with long-term contract customers
• A database, specifically a mailing list
• A strong community
• A large online following.

Thankfully, my client already has strong relationships with suppliers and very low staff turnover.

To further boost our asset value, we plan on allocating significant resources into a lead magnet and a CRM, so we can collect customer information when they opt in, allowing us to build out our own database.

We will also be investing in our social accounts to develop a strong community and a larger following online.

Marketing Ideas

1. Influencer partnerships

Many businesses are warming up to the idea of working with influencers. We ourselves have used influencers with measurable success, so this is something we want to invest a lot more in. In the past we have structured these deals based on paying per post/story and white listing (boosting the influencer’s content with ads). However, in this new phase of growth, we are seeking larger influencers with a mature audience to partner with us on an ‘influencing for equity’ deal. We are currently in negotiations with one who has a combined following of 3.5M across platforms. ?

2. Google, Facebook/Instagram and LinkedIn Ads:

My client is not running Google ads due to how costly key words in the construction industry are. However, we have been running Facebook/IG ads (very cautiously) on a moderate budget with moderate success. Based on results so far, we plan to increase ad spend for IG specifically. Finally, we plan on setting up LinkedIn ads as well. Our rationale for this is that we need exposure to the decision makers at the larger private development firms that award long-term contracts, and most of them are on LinkedIn. We will run ads targeting the employees of these companies, then use that as a way to get a foot in the door.

3. Local Marketing

The construction business is still very personalized and local, which is likely why word of mouth has worked very well for us. Therefore, we want to boost this further by investing in high-touch marketing tactics like Referral programs, hand-written cards, and PR Packages sent via snail mail to court prospective clients. People barely read their email or DMs, but if you send that project manager an expensive whisky or coffee pack from that brand they love, along with flowers for the wife and a hand-written note, you will have their attention.

4. Google My Business

GMB is still considered the king of local SEO traffic. Unfortunately, my client doesn’t have very many Google Reviews. For a construction company, this may read as a red flag to those that don’t know the business. Therefore, we will focus on generating around 100 reviews on Google, and around 50 reviews on Facebook. We will ensure the Google My Business (GMB) page is well-optimized, including business hours, pictures, and services. We will be posting on GMB regularly, with new posts every month. Based on how SEO works, we can conclude that increasing the frequency of posts on GMB will help extend our reach further.

5. Email Marketing (Nurturing)

Thus far, we haven’t had a CRM in place. However, our plan is to establish a CRM program (I personally prefer GoHighLevel) to leverage the company's most valuable asset: an existing client base of over 800 customers.

6. Outreach

We are currently compiling a list of cold leads' emails and phone numbers for various industries, including private developers, architects, real estate agents and land surveyors. Our primary ways of collecting these leads is by buying a list from data agencies, borrowing a list from complimentary service providers like architects, and hiring contractors on Fiverr to scrape lists for us. We are also working on developing an email/cold call strategy for these cold leads.

Conclusion

This high-level outline details our 3-year strategic plan for my client’s construction business.

Even though he has no plans to sell the business, I believe that running a business as if it’s in a condition to be sold is always beneficial.

As a business manager, my role is to guide my client in transforming his family business into a sellable asset.

I will be overseeing all marketing and Business Development activities to ensure we have consistent cashflow and that our revenue targets are met.

Also, working with the accounting department, I will be responsible for the P&L as well as ensuring we maintain impeccable financial records.

Finally, working with the operations team, I will be involved in establishing a proper corporate structure for the organization.

PS:

If you are a business manager, brand manager or a marketing manager, or if you work in strategy, I’d love to hear your thoughts on our strategies. Do they make sense? Are they viable? What would you change?

Let me know in the comments or chat with me in my DMs. ?