One of the questions we get asked early on by prospective clients is how to market a business for sale. It just so happens that this is one of our favorite questions to answer.
There are a number of things to look for when choosing a business broker. At the top of the list is their ability to effectively (and confidentially) market your business for sale.
In this article, we’ll discuss the primary framework that business brokers use to sell a business. We’ll take a look at the most effective marketing channels, the primary pieces of marketing collateral used to represent the business, and how to keep the sale confidential. Lastly, we’ll offer some tips on how to choose a firm with great marketing chops when you’re looking for a business broker to help you sell your business.
Who this article is for: This article is for owners of lower middle market businesses (i.e., annual sales between $2M and $25M) who are considering selling to an outside buyer.
The Importance of Great Marketing When Selling Your Small Business
There’s a tendency to compare selling a business to the process of selling a house. Business owners sometimes think it’s just a matter of putting together a slide deck with some basic information, then posting an ad on a website.
In reality, selling a business has very few similarities to selling real estate. The time and care that go into preparing the marketing materials that business buyers will view is just one example of how the two sales differ.
The best business brokers will tell you that great marketing is the key to a successful sale process. It’s tough to sell anything that has sub-standard marketing, and selling a small business is no exception. Taking the time to prepare a business for sale — including the marketing materials that will be used — is an investment that will pay off in the form of more and/or better buyers, a stronger negotiating position, a smoother due diligence process, and a higher selling price.
Great marketing will do a number of critical things that support the entire sale process, including:
- Accelerate the time it takes to get a deal closed
- Represent your business in the best possible light
- Control the amount and frequency of information exchanged
- Attract serious, high-quality buyers (and keep time-wasters at bay)
- Make both the sale process and major deal points clear to buyers
- Speak to how buyers will view the opportunity to acquire your business
- Signal that competent M&A professionals are representing your business
There’s a reason business brokers insist on investing time and effort on the front end: It ensures a solid start to the sale process and gives each subsequent step a better chance of success.
Where Do Business Brokers Market a Business for Sale?
One of the biggest impediments to selling a business is the lack of a ready-made market. If you’re selling a house, you can use national websites like Zillow or Trulia. There are also local multiple listing services (MLS) in every state. If you’re selling publicly-traded securities, you also have ready-made markets like the NYSE, AMEX, and NASDAQ.
When it comes to selling a privately-held company, no ready-made market exists: You will need to hire a professional to “make a market” for the sale of your business.
There are a number of resources that business brokers and M&A advisors use to market a business for sale. Which ones to use — and in what combination — depends on the business, the pool of potential buyers, and the sale process that the broker decides to run.
Here are the four most common channels used to market a business for sale:
Direct outreach to a custom buyer list
This method is used primarily for running a business auction process to sell your business. A targeted auction involves identifying a relatively small number of specific potential buyers (anywhere from three to perhaps a dozen) and reaching out to them directly via phone, email, U.S. mail, or social media accounts.
Internal (proprietary) email list of buyers
The best business brokers and M&A intermediaries are constantly contacted by buyers in search of great business-for-sale and investment opportunities. These buyers consist of private equity firms, search funds, strategic acquirers, and individual buyers.
A seasoned business brokerage firm will have a method for capturing buyer contact information and announcing new acquisition opportunities to them — usually via an email newsletter.
Social media platforms
Another form of digital marketing is using social media to reach potential buyers. This can be a broad effort that includes posting and/or advertising on Facebook, Twitter, and Instagram. Again, which social media channel to use is somewhat dependent on the type of business and potential buyer. For instance, a New York-based interior design business for sale may get noticed on Instagram, while buyers for a commercial sign manufacturer may be concentrated on Facebook.
LinkedIn is perhaps the most popular and effective social media platform for finding potential business buyers. Most decision-makers — like the CFO, CEO, owner, or corporate development director — are active users on LinkedIn. It’s also the social media platform of choice for private equity and the professionals who advise entrepreneurs like attorneys, accountants, valuation specialists, and wealth managers.
As mentioned above, there are few similarities between selling real estate and selling a business. One big difference is that there is no primary MLS for selling a business in the way that there is for real estate.
With that said, there are a number of proxies that can be used individually or in combination as part of a marketing plan to broadcast a business for sale opportunity. Some of the most popular online business-for-sale marketplaces include:
BizQuest (owned by BizBuySell)
LoopNet (owned by BizBuySell)
Flippa (online businesses)
EmpireFlippers (online businesses)
All of these websites advertise business listings from across the country to a nationwide audience. Listings can be filtered by type of business, sale price, location, and other metrics. While you’ll find mixed reviews on these websites, brokers almost always consider them useful as part of their overall marketing efforts.
An experienced business broker will know which channel — or combination of channels — will work best as part of a marketing strategy. Again, this is one of the main reasons it is difficult to sell a business without a broker.
The Two Marketing Documents Used to Sell a Business
There are two primary documents that a business broker creates — with your help and input — for the sale of your business: A teaser (sometimes called a “blind profile”) and a confidential information memorandum (CIM).
The teaser is a one-page document that provides just enough information about the business to get prospective buyers interested in learning more. This short document does not name the business or reveal any identifying information. The language in the teaser is typically the verbiage used to advertise on the marketing channels listed above.
Here is an example of how the teaser may introduce a business-for-sale opportunity:
25-Year-Old Commercial Sign Company in Booming NW Arkansas
Best-in-class in customer service & corporate culture! Fully professionalized & growing fast!
NUMBER OF EMPLOYEES
18 FT, 3 PT
Established in 1994 with $500 in startup capital, this business is now one of the top three commercial sign companies in Northwest Arkansas…(etc.)
The teaser says just enough for buyers to know whether or not they’d like to contact the business broker to learn more. After interested parties have been vetted by the business broker and signed a Non-Disclosure Agreement (NDA), the broker will typically forward a copy of the CIM.
The Confidential Information Memorandum (CIM)
The CIM is the primary marketing document used to sell a privately-held business. It should give a complete picture of the business — past, present, and future. After reading the CIM, a prospective buyer should know whether or not this is an acquisition opportunity they’d like to pursue. They should also have a good idea of what they think the business is worth and how to structure an offer.
Using the same company featured in the teaser above, the table of contents of a CIM may look something like this:
- Company Overview
- Major Milestones
- Investment Highlights
- Adjusted Income Statement Snapshot
- Adjusted Balance Sheet Snapshot
- Transaction and Process
- Products + Services
a. Sign Manufacturing
b. Installation + Service
c. Promotional Products
- Customer Base
a. Customer Segments
b. Major Accounts
c. Geographic Territory
a. Management Overview
d. Org Chart
- Facilities + Equipment
a. Front office
b. Back office
b. Social Media
c. Trade Shows
a. Customer Experience
b. Project Management
c. Human Resources
- Financial Overview
- Financial Records
- Cash Flow Analysis
- Summary Tax Returns
The CIM is often referred to as “the book.” It may be the most comprehensive document that anyone has ever written for your business, which is why it can easily take four to six weeks to produce. The creation of the CIM is often one of the reasons business brokers charge an upfront retainer in order to sell your business.
TIP: If a business broker doesn’t charge an upfront retainer to sell your business, they are incented to do the absolute minimum when it comes to marketing your business for sale. Ask any broker you’re considering to provide an example of one of their teasers, as well as a CIM. If you’re not blown away by how they represent a business, then find someone else. Alternatively, if you don’t want to pay an upfront retainer, you’ll need to lower your expectations when it comes to how the broker markets your business for sale.
How To Market a Business for Sale While Keeping It Confidential
This is another major reason to hire an experienced business broker to help you sell your business. It is no easy task to make a market for the sale of a business while simultaneously ensuring that nobody knows the business is for sale.
As mentioned above, buyers are typically required to sign an NDA before learning the identity of the business and receiving the CIM. A good business broker will also ask several questions via phone and email to make sure interested parties are financially qualified, understand the sale process, are legitimate buyers (not “looky-loos” or competitors on a fishing expedition), and are well-suited to be the new owner of your business.
Between the intentionally opaque verbiage of the teaser, the marketing channels used, the vetting process conducted by the business broker, and the signing of an NDA, the sale should stay well below the radar.
TIP: Look for a business broker or M&A advisor who has been in business for at least 10 years. You cannot survive in the industry unless you are extremely adept at selling businesses while maintaining strict confidentiality. It’s one of the main requirements of the profession.
Great Marketing Sets the Tone For the Sale Process
Most small business owners are great at marketing their own business but haven’t the foggiest notion of how to market the sale of the business to prospective buyers. Running a solid process with effective marketing is how business brokers more than earn their fees.
Great marketing is the foundation for the entire sales process. It is a critical component of any successful sale and, as such, should not be ignored or done poorly.
Think of great marketing as essential for attracting the right buyer, justifying your asking price, and helping you negotiate from a position of strength. Documents like the CIM will also help make the entire process go smoothly: From the buyer search to negotiating a Letter of Intent (LOI), to satisfying the buyer’s due diligence and getting a deal closed.
At Allan Taylor & Co. we are recognized as providing a level of marketing for our clients that is on par with investment bankers. We look forward to the opportunity to represent our clients and their business in the best possible light. Reach out today to learn more about business valuation and our selling process, including how we market a business for sale.
Barbara Taylor is the co-founder of Allan Taylor & Co. You can follow her on LinkedIn and Twitter.