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Whether you realize it or not, there will come a time to sell your business. You may tire of running the company, come up with a new idea you would like to pursue or experience some life event that takes you away from the work. But the worst thing that can happen is getting caught by surprise and having to sell spontaneously, so it’s best to plan ahead while you can. Yet even if you do this, deciding when to sell a business is still tricky.
There are lots of things that go into determining when to sell a business, but your marketing strategy is actually one of the most important. This is because the way you conduct marketing, especially if you are doing it well, will have a significant impact on the value of your business. And since the goal should always be to sell when the business is worth the most, marketing can be one of the most important factors in determining when to sell.
Types of exit strategies
It’s worth mentioning that there are actually several different types of exit strategies you could pursue. For example, initial public offerings (IPOs) are the most lucrative, but they are as likely as winning the lottery. Making this your primary plan is unrealistic.
Another common exit strategy is a merger, or an acquisition. However, these tend to be far more opportune than most business owners are comfortable with. There needs to be a similar company looking to expand at the same time you are looking to sell. If this isn’t the case, you’ll likely end up with little leverage and will either be unable to exit the business, or forced to settle for a deal that is not reflective of its value.
Because of this, selling your business to a willing buyer is really the most practical and fruitful exit strategy for most. There are numerous individuals out there with money to spend looking for profitable investments, so you will be able to have far more control over the process, as well as an increased chance of getting the right deal.
And when it comes to selling a business, marketing will play a huge role in determining the timing. To give you a better idea of what we mean, consider the following ways in which marketing affects the value of your business and subsequently the timing of its sale.
While marketing has many functions, one of the most important in today’s environment is branding. With so much competition coming from so many different angles, customers are easily drawn from one company to the next with something as simple as an exciting promotion or personalized discount
You can try to compete by constantly one-upping the deals you offer, but you will reach a point where this is no longer sustainable. You need to find ways to keep customers coming back to you for reasons more than just the prices you offer.
Offering great products and services is obviously the first part of this, but branding is just as important. What you offer needs to be about a lot more than just the physical product or service you provide; you need to make your customers feel like they are engaging with something much larger.
This is a long process that starts with something as simple as recognition and builds all the way to loyalty. Take a look at this nice diagram of the brand awareness cycle:
You obviously want to get as many people as possible into that “convinced” circle. This is where people buy into what you are saying and act upon this connection they’ve made with your brand.
This is simultaneously the best time to sell because anyone looking to buy a business will be far more likely to make an offer when they feel as though you have had success in bringing people from complete unawareness of your brand to full-on commitment.
If your branding campaign has just started, and you still don’t have many people fully convinced, then it might be a good idea to wait things out. You may still receive offers if investors see promise in your branding strategy, but they likely won’t be as high as if you were to sell when you’re further along.
Another point worth mentioning is that valuable brands tend to make more money, and the more profitable your company is, the more valuable it will be, meaning you can demand more for it.
As you can see, branding alone plays a huge role in deciding when to sell a business, but the effects of marketing on the decision to sell can be felt even further.
Search engine results
One of the primary focus of many marketing agencies and departments today is search engine optimization (SEO), and there’s good reason for this. A significant portion of the traffic you will receive to your website will come from organic traffic, and this can be very valuable to anyone interested in buying a business.
SEO is a multi-faceted operation, ranging from onsite design and development to content marketing, social media marketing and so on. But once you get yourself firmly positioned near the top of search results for valuable keywords, and once you have a process in place for drawing links and maintaining this position, it can be very hard for someone to unseat you. If investors see this, they will be far more willing to make a higher offer since they will see this performance as something they can easily scale up.
So, if your content marketing or link building strategy is just getting underway, then it might not be the best time to sell a business. It’s a lot easier to pitch investors a business that is driving traffic to its website through strong search engine results brought on by a quality backlink strategy.
If you’re struggling with your organic search engine performance, perhaps you’ll want to look into other ways of using search engines to drive traffic. You can hire an AdWords management agency to help you optimize Pay-Per-Click advertising, and this can do wonders for how you do with search engines. You’ll want to continue paying attention to organic results, but paid traffic can be quite effective and lucrative if done correctly.
Also, search engine rankings have been known to change unexpectedly. Google updates their algorithm and doesn’t really tell anyone when or how they are going to do this. While it’s unlikely a change will cause a massive fluctuation in your rankings, it has happened before. Selling while you’re on top is a great way to make sure you’re getting the highest value, and this is largely determined by your marketing strategy and its progression.
Steady lead generation
A good indicator of the health of a business is how well it does at generating new leads. It’s one thing to be able to convince customers to stay with you, but they can only buy so much. To push forward with growth and to continue expanding, you need to have a way of generating new leads so that you can convert people into customers and raise sales.
As your marketing strategy develops, you’re going to expand your reach so that you can contact current and potential customers at different “touch points.” These are the moments when people come into contact with your company, and the way in which your messaging aligns with their motivations will ultimately determine whether or not they choose to further engage.
Take a look at this diagram highlighting the different touch points and where they correspond with the sales funnel:
This is just a sample of the many different ways you can communicate with people, but you can clearly see how it’s a complicated, multilevel process that requires time to execute. When in full swing, nearly all of these touch points will be generating new leads and helping you convert people into customers.
Where you are in this process will drastically alter the decision as to when to sell a business. If you are only drawing leads from a few touch points, it might be a better idea to let things play out a little longer. Doing so will demonstrate to any potential investors that they can not only count on continued revenues, but that they can also expect to expand on what you’ve already accomplished.
Strong social following
Nowadays, social media is becoming a major focus of marketing efforts. When these platforms became popular, not too many people knew what to do with the information that they were getting, but they eventually figured out that it was a great way to target specific market segments while also engaging with audiences.
However, as you may well know, there’s a lot of noise in the social world. Carving out some space for yourself can be quite a challenge, but it is possible if you have the right strategy and some patience.
While social media engagement is about more than just likes and shares—the quality of the engagement also matters—having more of these will certainly favor well in any sales negotiation process. It demonstrates at least the beginning of an engaged and well-connected audience, and when investors see this, they see dollar signs.
Letting your social media marketing strategy play out, and giving yourself time to determine what works best for you, is ideal for maximizing the value of your business, and it’s yet another way that marketing helps determine when to sell a business.
In many ways, the life cycle of your marketing strategy coincides quite nicely with the timing for selling a business. The further along you are, and the more successful you are, the more you’ll likely get for your business. While it’s not always possible to fully control when to sell, by paying attention to where you are in your marketing efforts, you can plan accordingly to make sure the offers you receive accurately reflect the hard work you’ve put into making your business a success.
About the author: Jock is the founder of Digital Exits, an online brokerage services that specializes in the buying/selling and appraisal of online businesses. Clients come to him at many different points in the life of their business, and he always asks them to outline their marketing strategy. If there’s no rush to sell, he encourages them to wait, as a more-developed marketing strategy nearly always equates to a higher sale price. Jock is originally from Australia, but he now lives full-time in the U.S. Some of his work has been published online in outlets such as Forbes, CNBC, Business Insider and Entrepreneur.