Two tough truths about selling your business.
So you’ve spent years (often decades) building a business with your blood, sweat and tears and it’s finally time to sell and collect the reward for all your hard work, ingenuity and perseverance. There’s only two problems with you plan:
• Less than 35% of businesses sell when taken to market, and
• Only 23% of business owners are happy with their company valuation.
What these statistics demonstrate is that for more than two thirds of business owners, selling their most valuable asset is a disappointing experience at best and an impossible pipe dream at worst. So how do you ensure that you are one of the minority of business owners able to unlock the full value of your business with a successful sale?
Branding – the unheralded business sale tool.
A recent study by the Lubin School of Business at Pace University in New York demonstrates the business case for rebranding.
For many businesses, branding has not been a priority through their lifespan. Owners and management have been able to sustain and grow their businesses with a focus on product, sales and relationships rather than investing time and energy in the unfamiliar area of branding. This often means that at the point of preparing a business for sale, usually the only box that has not been ticked is brand.
It’s no coincidence that businesses who have failed to build a positive brand perception are over-represented in the 65% of businesses that are unable to sell.
The study found a direct correlation between positive brand perceptions and increased brand equity, which were found to be significantly associated with perceived price above and beyond book value and earnings information.
‘Evidence of this value is supplied by recent examples of the substantive sale price of a brand even after bankruptcy and liquidation of a ﬁrm’s remaining assets’, writes Amy Zipkin, a source quoted in the study.
The sale price of a business reﬂects investor perceptions of the current and future earnings potential of all its assets, both tangible and intangible ( Simon and Sullivan, 1993 ). Investors view brand equity as ‘the capitalized value of the proﬁts that result from associating that brand with particular products or services.’ Thus, anything that might positively change investor perceptions of brand equity will affect the businesses value due to positive perceptions of impact on future earnings.
Investors recognize the role that brand plays in a business’ ability to attract and retain customers. As investors’ perceptions of a business’ brand strength increase, the market reacts accordingly, adjusting perceptions of the ﬁnancial valuation of the business.
Put simply, in the same way it’s common practice to invest in the presentation of your home before selling to attract the maximum number of interested buyers and the maximum sale price, investing in the presentation of your business’ brand will positively impact market perceptions of value and attract more interested investors.
Recently we worked with a National Health Services business to rebrand them as part of their preparation for sale. The process was a success with the business attracting interest from multiple parties and the sale price exceeding initial expectations.
“Our rebranding was one of the very best investments of my life. Great brands attract attention. They cut through the crap. Business brokers love nothing more than introducing a great brand, it’s an easy sell, because great brands are rare. A great brand is like an A-Grade property. You know it when you see it, and so does everyone else. FOMO (fear of missing out) kicks in and creative tension is created… and suddenly your brand isn’t for sale, it’s for Auction. However, unlike A-Grade property, an A-grade brand doesn’t require millions to create… but it takes millions to buy. I’d comfortably say our rebrand delivered us 10 times the investment. I can’t think of a better commercial investment than an effective rebrand.”
If you’re considering selling your business, or have been trying without success, come and spend an hour with us to evaluate the potential for rebranding to positively impact your sale process. Contact us here.
Pic credit: Ryan McGuire