The persistent commercial turmoil born out of the global pandemic will likely prompt some struggling companies to seek investment, acquisition or merger as we move into 2021 in order to ensure survival. Whether you’re buying, selling or investing, you need to understand how and where strategic marketing will increase the financial valuation of your business.
Having the foresight to invest in activity which develops your brand equity three to five years before putting your company on the market can considerably increase the sales price and desirability to a strategic buyer. Brand recognition and customer loyalty always add to the intrinsic value of a company. As well as establishing your brand, make sure your competitive differentiation is clear. Positioning your business more attractively against competitors, makes it easier for you to charge higher prices and generate greater margins.
Investors or potential partners will also want a company that is well-positioned to weather the inevitable storms that lie ahead. In a word, resilience: you’ll need to make sure your company is robust. Does any one client make up more than 15-25% of your margin and therefore pose a serious risk if they ceased trading with you? Is work concentrated in an industry with extreme volatility? Your product and service offering is another important consideration here: If the economy faces rough waters, will you be one of the first suppliers to be cut?
It can be a surprise to business owners when they are asked to explain their marketing maturity. Questions around customer intelligence, data analysis and marketing tools regularly trip up senior management teams when asked to map out future decision-making processes during the due diligence process.
You should be able to describe how marketing efforts have historically contributed to the financial success of the company – including which of those efforts were most effective and which were a waste of time and money.
This only begins to scratch the surface of how marketing can contribute to mergers, acquisitions and succession planning. Marketing also helps HR attract top talent, salespeople to close deals and enables exceptional customer experiences. So, whether you are a buyer, seller or simply want to scale up your business – marketing is one of the primary considerations when it comes to company valuation.
We typically find ourselves called in to assist with one or more of the following situations.
- Owners/Investors who have recently purchased a brand with room to improve
- Owners who need to merge multiple brands as the result of acquisition
- Sellers who have a short-term (3- to 5-year) plan to position the business for maximum sale value
- Sellers who have a long-term (10+ year) plan to sell or transition the business but want to begin the process to increase their value now.