Step 6 

Marketing the Business

In Step 5, we completed the marketing plan. We know the categories of buyers we plan to contact and we have a schedule. Step 6 is executing that plan.

Research 

As mentioned last month, 70% of buyers come from either structured searches or in-house databases. So it makes sense to concentrate efforts in these areas.

My primary external database is the Dun & Bradstreet Million Dollar Database. This is a listing of the 10 million or so companies in the U.S. with over $3 million in annual revenues. I pay an annual subscription fee to use it. If you or your intermediary doesn't have access to it, you might want to investigate a subscription for the duration of your campaign. It has great information, including type of business (SIC Code), major executives (some even with brief bios and birth dates), brief business description and lots of other information. It doesn't include credit information, however.

Other competitive databases are available, but my experience is the D&B is adequate. I say adequate, because no database is 100% complete and accurate. My experience is D&B is above 90% accurate and that allows one to run an effective campaign.

The D&B allows downloading directly into a contact management database where solicitation letters can be produced by mail merge.

In addition, you will want to investigate other information sources, depending on your industry. Trade associations usually have directories that are available at least to members. Sometimes trade magazines sell their lists. Many trade associations have Internet sites with all members listed with links to member's websites.

If your buyer might come from overseas, D&B has a service that provides that information. I have found many overseas trade associations list their members in the web.

As mentioned before, you will want to direct your letter to the Chairman, CEO or President. When searching through the Internet, you might not find the specific officer listed, however you will find "Contact Us" button that you can use to contact the company and ask for the name of the specific officer. The easiest way is just call the company and ask.

Intermediary's In-house Databases 

All intermediaries maintain databases of buyer candidates who have contacted them and asked to be notified when certain types of businesses become available. This short cuts the research process in that the names are available and ready to contact through a mail merge process. About 35% of our buyers come from our in-house database which makes it an effective and valuable tool.

Advertising As mentioned last month, advertising in major media is not efficient or effective. You will want to defer paid media advertising unless nothing else works.

However, you can advertise on the Internet for little cost and effort. So should develop some Internet advertising on the sites dedicated to middle market businesses. Pay attention to confidentiality; that responder could be your valued employee or your esteemed competitor.

Fielding Responses 

You need an intermediary to field the responses. It is almost impossible to maintain confidentiality if you have responses to your search directed to you personally.

The goal in handling responses is to qualify the responder and to get them to sign a Confidentiality Agreement.

Responses usually come by email or by telephone. It is a great opportunity to do preliminary qualifying and to screen out any unwanteds. You should not have "unwanteds" in your mail list in the first place, however, I've seen unwanted competitors show up at this point because the D&B official corporate name was different from the dba or subsidiary name and I didn't recognize it until we were at the response level.

I send the responding candidates the Profile of the Company along with the Confidentiality Agreement. If I don't know the qualifications of the buyer candidate, I ask for financial and technical qualifications to be sent back with the signed Confidentiality Agreement.

Qualifying 

A little research can garner a lot of information. Most companies have websites; public companies have 10Ks usually available on the web. If you suspect the company to be shaky, a D&B can be run, however, most of the time we wait until the due diligence phase to check credit. Many times, just searching on the company name in one of the popular search engines will give you more information than you want to read.

Information on individual buyers is a lot harder to come by than on companies. In cases of individuals I ask them for a personal financial statement and a résumé. This may seem awkward but your intermediary will do this for you. Individual buyers know they will have to produce a personal financial statement in order to qualify. If they hesitate, you should hesitate to deal with them because they don't have the financial clout to buy your business.

Descriptive Report 

When the Confidentiality Agreement is signed and you and your intermediary are satisfied that the candidate is qualified, sent the Descriptive Report.

This is the first time that the candidate knows the identity of you and your company.

Site Visit 

Nobody ever buys a business without visiting the site and talking to the owner(s). If after reviewing the Descriptive Report, there is continuing interest, the candidate will want to visit the site and talk to you.

The candidate has several important pieces of information to fill in. In addition to assessing the physical condition of the business, the candidate will investigate the following points in that initial visit. These points are mostly personal and are therefore best covered in a personal visit. Make sure you have valid and convincing answers prepared in advance.

(1) Why are you selling-is there some reason other than a price you can't refuse? (2) What do you plan to do after you sell? (3) What transition and long-term activities to you see yourself doing with reference to the business? (4) What is your asking price? (Defer this question to your intermediary and let the intermediary use the power of limited authority to enhance value. In most situations I recommend "no asking price.")

In the site visit, you will want to assess the technical qualifications of the buyer candidate. Is it a fit? Is there synergy? Is there chemistry? Would you feel comfortable with this company or person running your company?

At the end of the site visit, you will want to establish the next step of the candidate. (The goal is to get them to commit to submitting a Letter of Intent.)

So much for marketing. In next month's newsletter, we will talk about getting an auction going and how that enhances value for you. ________________________________________ 

Tip of the Month

 In Bill Clinton's last Tax Bill, installment sales tax treatment for small businesses was eliminated. This meant that if you took 30% down on the sale of your business and you were in the 40% tax bracket, you would have to come up with more money to pay your taxes than you received in cash at closing. This effectively stopped seller financing.

The good news is that Congress repealed this new tax retroactively after a massive effort by small business lobbying groups, the International Business Brokers Association and others. So it's as if it never happened. 

________________________________________ 

Comments Email me <hankjames@cfaw.com> your comments on this newsletter. Do you agree, disagree or have an experience that would be beneficial to our readers. I'll publish your comments in subsequent newsletters with your permission, of course. ________________________________________

Next Month Next month we will cover Step 7, Auction ________________________________________

Disclaimer This publication is intended to help the reader understand the issues involved in selling a business. It is designed to provide information reflecting the experience of the editors and writers in helping sellers of businesses. It is prepared and presented with the understanding that the publishers, editors and writers are not engaged in rendering legal, accounting or other professional service. If legal accounting or other expert advice is sought, it should be acquired from competent professionals. The reader would be well advised to seek such professional assistance in the early stages of any consideration of the sale or purchase of a business. ________________________________________

Policies Feel free to forward this newsletter to anyone you think will benefit by it.

Permission to copy in entirety granted.