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Marketing the for-sale business
24-Oct-2007
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Careless marketing attracts disappointing prospects – unqualified, uninformed and likely a waste of time – who are unlikely to see, and be prepared to pay for, the true value proposition in the business.
The real key to successfully marketing a for-sale business is to connect with the right type of buyer. The better the fit, the more demand and the greater the premium the buyer will pay. The needs of the right buyer types will also influence the terms and marketing messages. For instance, a willingness by current management to stay on may be a real positive for a financial buyer.
Buyers are in the market for a variety of reasons.
Strategic buyers consider how a purchase will contribute to their long-term plans. The classic strategic buyer is a larger company operating in the same industry in a nearby region, or a company in a related industry that recognizes strengths in the for-sale business from which they could benefit, such as by picking up a new product line or expanding their customer base.
Financial buyers are more interested in a company's profitability and stability. They are typically individuals (such as former executives who want to buy themselves a job by finding a company to manage) or companies with money to invest, looking for a good return. These buyers are interested not so much in what the business actually does as whether it looks interesting to run or provides a good return. |
 
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The selling memorandum document encapsulates the marketing messages in terms of explaining the business, its merits and its potential in a summary form. A good selling memorandum must perform two purposes: it must present completely factual information while at the same time creating marketing excitement.
It can take several weeks to develop a selling memorandum that does full justice to the opportunities offered by the for-sale business and which is couched in appropriate terms for the target buyer audience. A business broker can be useful, but only if they make the effort to get to know the business well enough to fully understand the value proposition.
Finally, it’s sensible to address, and perhaps dispose of, a question that invariably arises somewhere in negotiations and which requires a credible answer, preferably with a positive spin – why is the business up for sale?
The marketing plan lays out in detail what activities will be undertaken to create interest in the sale and attract the right buyers.
Some businesses aren’t advertised in the media. The owner or their broker researches potential buyers and draws up a list of people to approach.
If the business is to be openly advertised then the marketing plan includes an advertising schedule identifying the timing and types of advertising media that best expose the business. These may be trade and consumer publications, local business and networking organizations, broker agencies or others. Advertising in poorly targeted or low - mediums wastes time and money and will likely attract the wrong type of prospect.
The ad must be well crafted and comprehensive. Buyers may well bypass a slightly described business feeling that the lack of detail indicates the broker doesn't know that much about the listing (and contacting them would be a waste of time) or that the owner isn’t sufficiently organized to have done their homework and compiled the necessary information. Brief information on all pertinent areas gives buyers a sense of comfort. And those who respond are in a sense pre-qualified, saving a lot of time in explaining and convincing them of the value proposition.
Confidentiality is a key element in creating a smooth path through the marketing phase.
While comprehensive, the selling memorandum shouldn’t include confidential information such as names of customers or the product pricing structure. That information is only revealed once there’s been an opportunity to gauge how serious a prospective purchaser is and a confidentiality agreement has been put in place.
There is also a confidentiality issue regarding the fact that the business is for sale. Many people assume that companies are put up for sale when they are on shaky financial ground. Credit may become harder to get, customers go searching for other sources and suppliers for other customers. The news of a sale can be destabilising internally also. Key employees might start searching for alternative employment while others may simply lose interest in their own job performance. The best course of action is generally to keep plans of divestiture close to the chest for as long as possible. Employing a broker to act as intermediary in the marketing process is an effective way of managing this.
A good broker will hold an extensive list of contacts, including brokers in other areas, to sift through in search of a likely match. They can arrange the advertising under their own name and make the approach to potential buyers to maintain confidentiality of the identity of the for-sale business until some positive interest is shown. The broker also screens potential buyers to weed out those who are merely tire kicking or unlikely to be able to arrange the purchase finance.
Having a broker carry out this work will ensure it is done professionally and leave the owner free to concentrate on running the business.
Marketing, if compressed into a few weeks at the start of a sale process, can never be as effective as well planned preparation undertaken over several months and encompassing data gathering, research and the tailoring of marketing materials to individual buyer segments.
With an understanding of the issues involved in marketing, and with professional assistance, an owner is well on the way towards striking the deal that’s right for them.
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