As an entrepreneur, it is logical to focus your marketing and sales efforts on your products and services in an effort to drive sales. However, this hyper-focus on sales often neglects the critical element of building a brand for the business. One area where this catches up with the business owner is when they eventually decide to sell the company. Suddenly, it looks much less attractive, viewed as a holistic offering, than a pure focus on the income statement and balance sheet.
So why is building a business brand so essential to maximising business value?
Here are our top reasons why…
Shifting trust from the owner to the business
A key element of building a business brand involves gradually moving the trust that customers place in the business owner over to the business itself. When a company starts, it is based on personal relationships through word of mouth and direct selling. Everyone knows “this company is managed by this owner” which delivers a level of brand loyalty, not towards the business, but the person behind it. Building a business brand for sale involves migrating trust to the business itself. This way, the business brand accrues value and the business becomes less dependent on the owner, which allows for a much stronger negotiating position when a sale is on the table.
Positioning to a different audience
The type of customer that buys your products and services is almost certainly different from those that will eventually be interested in buying your business. For example, a business could be selling to building contractors but eventually be bought by an engineering firm. This difference requires the business owner to engage with a vastly different audience when promoting the business rather than its products. The market for buying your business (or funding it) requires a different positioning strategy. Marketing the business differs from finding new customers for your products and services.
It’s much more than the product offering
Product marketing strategies address the product, pricing, packaging and promotion (the famous 4 p’s of marketing). These same building blocks exist in marketing your business, however, this customer has different needs to be satisfied. Often, the elements of a business that are mostly overlooked become the most important when selling the business. These include both marketing elements, such as brand credibility, reputation, business development processes, and compliance elements, such as risk mitigation, good record-keeping, and strong internal processes. This means that as a business owner wishing to sell, you have many more things to consider when selling your business! Essentially, you have a new set of goals to achieve – this can be exciting and also daunting for entrepreneurs who may not have sold a business before.
Being committed to your product/service is necessary but not enough to ensure that you can successfully sell your business
Patience, planning and perseverance
Building a marketing strategy to sell a business requires careful planning and execution. A thorough review of your business brand should form part of the long-term journey of preparing for sale. Paying attention to your business brand adds an additional dimension to the typical product-sales focus of most entrepreneurs. It gives your business added credibility as a going concern and helps to solidify its place in the competitive market.
The skills required to market a business successfully as an acquisition target often don’t co-exist in traditional marketing service providers such as advertising and PR agencies. This is because they do not have the combination of financial deal-making experience of the corporate buyer and the strategic brand and marketing skills of a trained marketing professional. Traditional agencies know how to market products, not businesses. This is where an experienced marketing consultant and transaction specialist, working together with the business owner, can become a powerful combination in the run-up to a business sale.
In our experience, it pays to bring professionals alongside your business early in the business sale process. We suggest taking a long-term view and starting to position the business for acquisition up to 5 years before a sale. This time allows for appropriate strategy and planning, ensuring a greater chance that objectives and outcomes align with shareholder expectations. It will also reduce the friction so often experienced in transactions of this nature.
Selling your business is a different game from selling your products. Companies that are well prepared for a sale sell for up to 300% more than companies that undertake last-minute transactions based on desperation and little preparation.
Written in collaboration with Guy Addison, private equity professional
