Guy Addison (Transaction Consultant) and Bernard Jansen (Marketing Consultant) discuss how and why the branding of a business is so important when preparing it for a sale and the differences between selling a company, vs. selling the products and services produced by the company.
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, from the outside-in, than a pure focus on one metric of performance.
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 the owner” which in itself delivers a level of brand loyalty, not towards the business, but the person behind the business. 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 market.
The type of customer that buys your products and services are almost certainly different from those that will eventually be interested in buying the business itself. 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 customer. 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.
Traditional marketing strategies talk to product, price, packaging and promotion (the famous 4 p’s). These same building blocks exist in marketing your business, however the target ‘customer’ has different needs to be satisfied. Often the elements of a business that are mostly overlooked in marketing become the most important when selling the business. These include elements such as compliance, risk mitigation, good record keeping, and strong internal processes. What this means is that as a business owner wishing to sell, you have a lot 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 that may not have sold a business before.
Objectivity is key
Despite company founders being proud of the organisation that they have created, Business Acquirors may not care as much about the brand name if it doesn’t fit within their acquisition strategy. A seasoned acquiror will often look at targets with much less emotion. Hence, being committed to your product / service is necessary but not enough to ensure that you can successfully sell your business. Understanding this process and remaining objective are crucial factors for any Business Owner to understand and apply.
Patience, planning and perseverance
Building a business sale marketing strategy 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 successfully market a business for sale 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 have seen business owners bring in professionals up to 5 years in the leadup to a sale. This time allows for appropriate strategy and planning; ensuring a much greater chance that objectives and outcomes are aligned 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.
About the authors
Guy Addison is a Chartered Accountant, independent transaction consultant and Director at Addison Inc.
Bernard Jansen has an MBA, marketing consultant and founder of Firejuice.
Phone: +27 (0) 10 005 3277