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Advertising and marketing are critical to selling a business for the best price and terms within a reasonable period of time. The business must be attractively packaged and exposed to a broad range of potential buyers, while keeping the sale confidential.
Confidentiality Preserves Value
Confidentiality is one of the main differences between selling businesses versus real estate or other property. Owners often want to keep the sale a secret for as long as possible. They fear losing customers or employees, or being taken advantage of by competitors, if word gets out too early. Such a breach of confidentiality could reduce the sales and profitability of the business, and result in a lower selling price. Smart business owners hire business advisors to sell the business, while the owner continues to run it will and preserve its value. Buyers should not learn the identity of the business until they have been screened and signed “Confidentiality Agreements,” also known as “Non-Disclosure Agreements” (NDAs).
Buyers respond to attractive packaging, whether it is in the marketing of a business or any other product. Better financials and other business information will lead to better packaging. Conversely, “garbage in equals garbage out.” The key package is the “Confidential Business Profile,” which summarizes the key selling points, the “story” of the business, the reason for selling, the asking price and terms, lease terms, financials and other key aspects of the business. Its length runs from 1-2 pages for a small simple business to 50+ pages for a large complex business. The profile may be accompanied by photographs, video, and other documents. It provides content for advertisements and other marketing materials.
The Seller and Business Advisor should consider, “who are the most likely buyers, where can they be found, and how can we reach them?” Will they be “Financial Buyers”--such as corporate refugees who want to buy themselves a job or Private Equity Groups (PEGs)—who are focused on financial performance? On the other hand, they may be “Strategic Buyers” —competitors, customers, or suppliers already in the business—looking for synergies and often willing to pay more than Financial Buyers. Make sure that the Business Advisor will “Cooperate,” or share his fee, with another broker who finds someone a buyer. This will further expand the pool of buyers.
The last, but certainly not the least, marketing step is actually reaching out to buyers. Confidentiality precludes common real estate methods like exterior signs and multiple listing services. Sellers and Business Brokers commonly use, and perhaps rely too much on, internet websites to inexpensively promote their business sales. Smart Sellers and Business Advisors will also use buyer databases, trade publications, regional newspapers, letters, postcards and flyers as appropriate. Remember that better exposure brings more buyers and a higher selling price. You get what you pay for!