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Most companies aren’t likely to be acquired in an eyebrow-raising $39 billion deal, such as AstraZeneca’s purchase of Alexion. Nonetheless, news of companies getting acquired or going public encourages entrepreneurs to consider how to prepare their firms for such a transaction.
The decision to pursue an exit should influence each area of the business since everything will now work in support of this goal. That decision doesn’t mean operations will change.
“Business owners pursuing an exit should run the business as if they were never going to sell it,” Richard Kestenbaum and Errol Glasser say. Kestenbaum and Glasser are partners at Triangle Capital, a firm that specializes in mergers, acquisitions and corporate finance transactions.
Running a business as though owners were not looking to sell it means continuing to follow pre-existing maintenance or growth strategies. That said, the company’s business goals — including the potential for exit — should continue informing day-to-day decisions. This mindset is particularly true when it comes to marketing.
Marketing translates business goals into outreach strategies. Marketing’s influence should be visible at every stage of a company’s lifecycle. In a company’s infancy, market awareness and validation are typically the main priorities, and tactics should support that. As a business matures, its marketing efforts begin reflecting the need to achieve widespread adoption. And when owners are considering or actively pursuing an exit, communicating its successes and competitive differentiators often move to the front of the owners’ marketing agenda.
Applying Kestenbaum and Glasser’s sentiment about “running the business as if you’re never going to sell it” means even if your company is ramping up for acquisition or IPO, efforts aimed at furthering awareness and adoption should not be completely replaced by drawing attention to previous successes. Companies attract interest, demonstrate value and increase worth by continuing to grow. Business owners put themselves in the best position to negotiate and benefit by strengthening their company through marketing and every other effort, no matter how long an exit takes.
Here are four other insights about pursuing an exit and how marketing can support Kestenbaum and Glasser’s insights.
1. Offer a scalable product and focus on driving revenue
To achieve scale, marketing should focus on building the sales funnel. Maintaining a steady supply of customers ensures long-term viability. Doing so also makes a company more attractive to buyers. During a company’s life cycle, selling to the early adopters can be handled by a small sales team, the owner/founder and other key executives. To scale to the next level and tackle the early majority, companies need to focus on scaling their marketing efforts and ensuring they can deliver their product to more customers.
2. Manage risk
Some risks are inherent within a firm’s given industry. For example, the oil industry comes with fire risk, But there is also a controllable risk that businesses can manage.
Execution risk is the possibility that a business will not be able to act on its business plan. Showing that a business has an operating plan and that each department is aligned with that plan is important. When thinking about marketing, the number one metric businesses need to show is the quantity of leads marketing sends to the sales teams and that the supply of leads will remain viable.
Related: How to Create a Marketing Plan
3. Gross margin and customer acquisition cost
According to Kestenbaum, marketing can directly influence two key metrics that investors specifically value: gross margin and customer acquisition costs.
“Most companies have already benefited from the economics of scale by the time they consider selling,” Kestenbaum says. “If you want to divest your business, gross margin must already be strong.”
Using data to inform and optimize marketing is key to ensuring customer acquisition costs are streamlined. This is particularly important, considering customer acquisition costs have a major influence on margins.
To decrease customer acquisition costs, companies must avoid treating each marketing channel as if it is independent. Acquiring more customers at a lower cost requires marketing channels to work in conjunction with each other — and with the business as a whole. Rather than fixating on one campaign’s click-through rate, marketing must look at each campaign holistically to determine how each channel can come together to support customer acquisition and business goals.
Likewise, in many companies, marketing serves at the whim of sales — creating decks, designing campaigns or otherwise scrambling without clear benchmarks.
A clear operational plan can help organizations establish a foundation to generate a healthy sales pipeline that shortens the sales cycle while driving demand and elevating the company’s position in the market.
4. Demonstrate and communicate value
Don’t wait around for potential investors or even the industry to notice what you’re doing — actively communicate it to them.
- Communicate your company’s total addressable market. Many companies only communicate one part of their value proposition. In 2018, before Oracle acquired grapeshot for around $325 Million, Channel V Media was engaged to communicate the complete value of their technology to the market. The company had been pigeonholed into the “brand safety technology” category, but its technology had much wider applications. To highlight this, we worked with Grapeshot to create a new market category called “contextual intelligence”. Our efforts enabled Grapeshot to talk about their technologies’ full capabilities and larger market potential while still only generating revenue from their core brand safety product.
- Appeal to buyers with a focus on value. Why would someone want to purchase your business right now? While there is no easy formula or one right answer when it comes to a sales proposition, your company’s uniqueness must be patently clear. By aligning marketing goals and business goals, you can more clearly measure success and set yourself up for a promising offer.
“Be honest with yourself about what you really have. Assess your business and have a close look at the market,” Glasser says, noting the importance of self-awareness in company assessment.
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