When it comes to selling a business, many of us know the standard considerations that buyers need to know when it comes to purchasing a business. This includes the likes of your business and financial model, brand equity, marketing performance, credit history, company structure, founders, and other legalities.
Whilst these factors will always matter when it comes to selling a business, there are growth marketing practices that need to be considered when it comes to your valuation.
As an experienced growth marketer, having worked with numerous funded startups and eCommerce brands, as well as going through the negotiation and due diligence phase with buyers for a couple of businesses, I picked up on some factors related to marketing that isn’t mentioned in too many guides.
So, I’m here to share with you four growth marketing practices that will go a long way when it comes to negotiating your exit, whether it be a small or large exit.
Essential Practice 1: Diversification of Acquisition Channels & Revenue Generation
One of the first (and arguably most important) essential practices of growth marketing that applies to all types of digital businesses, which can have an impact on evaluation, is ensuring you have a diversified channel mix of acquiring new visitors and users.
Why does diversification matter to investors and buyers? There are a few reasons why this matters to them. They care about:
- De-risking your reliance on a specific channel – nothing good lasts forever
- The ability that your business can maneuver with ever-changing market-conditions
- Your TAM (total addressable market) coverage for targeting your audience – Can you increase your TAM with new platforms and channels?
- How specific channels can fatigue with performance over time – for example, Facebook Ads. Can you find channel-market fit with another platform?
- More competition entering specific channels where you may be a leader in. More competition means increased costs overall – for example, TikTok Ad CPMs are on the rise for certain categories.
- How can you bring down your CAC over time? Do you have practices in place that generates new users from your existing audience? I will talk more about this below.
- Your ability, as well as your service, products, or website, and how nimble the business can be with new opportunities. In other words, the ability of the business to move quickly (or have as part of the plan) to explore alternative opportunities.
How smart are investors and buyers when it comes to understanding marketing channels?
As I touched on earlier, I’ve gone through the due diligence process myself with two businesses, and I can tell you that investors and buyers are becoming savvier than ever when it comes to digital marketing channels and how they actually impact a business.
This is definitely evident with those who are doing 6-figure or 7-figure exits.
Doing high volumes of traffic and signing up new users is one thing, but it’s not just the overall number of ‘new’ visitors or users that you need to prove.
It’s about quality. You need to have a decent percentage of acquiring visitors and users who are ‘high intent’ and are qualified prospects, where there is a greater likelihood that they will convert or make a purchase of your product offering or service.
Smart investors and buyers can see through vanity metrics.
For example, unique traffic volumes per month may look and be really impressive, but how much of that traffic is qualified? How many people opt for your lead magnets? How many enquire about your services? How many sign-up as users?
Ultimately, the question that matters most for investors and buyers is – what is the conversion rate of all these initiatives (such as the example questions I’ve just mentioned) and channels, siloed or combined, that lead to actual sales and revenue?
It’s all about the quality and high intent of audiences that are coming to your website, which plays a big part in valuation.
What if you only have one primary channel for acquisition, which is contributing the most to revenue?
If you find yourself in this position, there are two major growth marketing strategies you can focus on:
- Tactics that require experimentation – higher investment
- Tactics that you can control – lower investment (in most cases)
Tactics that require experimentation
With tactics that require experimentation, what I’m referring to here is trying out new initiatives that require testing out 3rd-party channels. So, that can be testing out new paid ad channels, community forums, outreach to influencers, going on podcasts, and there are plenty of other initiatives you can try.
Typically, these are higher investment opportunities that either require budgets for ads and/or resources from contractors and team members.
For example, if you’re a SaaS business that has relied upon Google Ads to bring in qualified leads, then you may want to test B2B email outreach to drive more demo bookings.
Tactics that you can control
With tactics you can control, I’m referring to ‘first-party’ strategies that you can implement.
Examples include referral programs, affiliate programs, loyalty programs, NFTs, subscriptions, content marketing, SEO, newsletter sign-ups, and other CRO-based strategies.
In a lot of cases, implementing these tactics doesn’t require significant investment. I often refer to them as low-hanging fruit tactics, and they do often get overlooked by businesses that are generating good volumes of traffic and user acquisition.
For example, if you’re an eCommerce business that has seen a decline, or fluctuation, in your Facebook Ads performance, implementing a referral program can help enable your existing customers to generate new ones. The great thing about first-party strategies, like referral programs, is that there are plenty of “off the shelf” software solutions, such as these referral marketing tools, which are typically quite affordable, fast to implement, and can deliver revenue from existing channels that doesn’t require more ads spend.
Another key factor related to referral marketing is something called viral coefficient. In layman’s terms, this means the number of new users that are being generated from your existing users.
So, if you have a referral channel that is working and your existing audience is inviting and bringing on new users, this is usually a great signal to buyers that your product/service is something that people love.
Essential Practice 2: Ensure Your Analytics Stack & Tracking are Working as Best They Can (Data Fidelity is Key)
It may sound like trivial advice, but it’s important to track your metrics across the whole customer journey, from the top of the funnel to the bottom.
That includes everything from your website analytics, product analytics, acquisition channel analytics (e.g. ad platforms, email outreach, etc.), and your revenue/profit metrics through digital platforms.
Will you achieve 100% data fidelity, where tracking is reliable, 100% of the time?
For revenue and profit, yes, it should be 100%.
However, for website, product and acquisition channel analytics, unfortunately, the reality is for many businesses, most likely not. Many marketers know this pain.
Sometimes, there are numerous reasons why analytics may sometimes not track properly.
Having said that, it’s incredibly important to strive for the best data fidelity and tracking you possibly can.
What are the best practices for keeping your analytics clean, easy to understand, and in order?
Here are some good practices used by top data-driven companies and startups when it comes to keeping track of data quality:
- UTMs – Make sure to use UTMs correctly for every campaign, medium and channel. My recommendation is to set up a UTM taxonomy, which you and your team can refer to every time.
- Dashboards – Set up separate dashboards for each of your main channels, campaigns, and sources.
- Segmentation – In relation to dashboards, make sure to keep track of specific segments and have them saved as separate views. For example, geography, demographics, product purchases, and many others you can do.
If you adopt these three practices and do them regularly, it will help you keep on top of what’s actually contributing to performance.
If you check the reports you set up and follow best practices, you will pick up potential data infidelity issues, which you can then address.
Additionally, adopting these practices and making them evident when it comes to the negotiation and due diligence phase with buyers will increase overall confidence. It ensures and provides peace of mind that good measures have been put in place to mitigate data issues.
Essential Practice 3: Marketing Infrastructure – Get Your Project Management, Experimentation Frameworks, and Assets Organised
If you’re doing a sale for less than $100k, this most likely won’t be emphasised in terms of importance.
However, if you want to do a $100k+ or 7-figure exit, this definitely matters. So, read on.
When it comes to an acquisition, a great way to highlight the value of your IP, and make it more attractive for buyers, is getting your house in order.
Meaning, it’s important to collate and have all your internal systems updated, documentation properly recorded, and your key campaigns, tactics and tests you’ve tried all logged properly.
Why does this practice matter when it comes to acquisitions?
It’s to do with the ownership transition from seller to buyer.
The higher your potential business exit, the higher of importance when it comes to making sure your marketing infrastructure is well organised.
This is particularly important for ‘strategic’ investors. In other words, they’re buyers (i.e. larger companies) who are looking to purchase a business as part of their long-term plans or to merge/integrate within an existing asset of their current business operations.
Why should you take this practice seriously?
Well, when it comes to these sorts of deals, potential buyers are most likely checking out other alternative solutions as well, which means they’re potentially checking out your competition.
Remember, their goal is to acquire a business that they can put into motion for their commercial goals and generate a faster ROI.
In order to make a good impression, and also increase the ‘attractiveness’ of your business within the decision-making stage of buyers who are weighing up your valuation, make sure your key internal assets are well-organised.
Essential Practice 4: Streamline Automation Workflows & Processes
This final growth marketing practice ties nicely with what we talked about with marketing infrastructure and increasing the ‘attractiveness’ of your business for serious buyers.
Having streamlined processes and workflows is a really attractive business trait for buyers.
Why? It’s because automation helps with maximising efficiencies as part of a business. It means that internal systems are ripe (and ready) for scaling.
Remember, the goal of anyone buying a business is for them to scale and multiply the business in the shortest amount of time possible.
Yes, new investment of funds from the buyer helps with accelerating growth, but existing efficiencies that are in place, which have helped get the business to the level ready for acquisition, makes it a much more appealing prospect for the buyer.
It means that they can acquire with confidence and add fuel to the fire for growth rather than finding out later that they have ‘fires’ to put out.
What are some examples of automation workflows?
The reality is you are, or most likely, adopting really good operational procedures within your business, but the question is, are you maximising the efficiencies of your processes?
Here are a few ideas and examples (that I love) to consider when it comes to automation.
- Lead Generation – Automate the process of tagging email leads that flow through to a CRM. Segment tags for personalised marketing nurture campaigns.
- HR – Automate payroll, contractor hours and invoices using the likes of Deel and Xero.
- Contractors – Automate task management using the likes of Asana.
- Notifications – Get notified of key events using platforms like Slack.
- Reporting – Receive daily, weekly or monthly reports of your metrics across all your key marketing, product, revenue and data analytics.
There are many other possibilities when it comes to automation, but if you get these five key areas right and working like a well-oiled machine, it’s a great sign your business is functioning at a great efficiency.
Whilst many of these practices are outside of the normal words of wisdom you hear when it comes to selling a business, it’s important to do whatever it takes to increase your exit valuation. Just by adopting and implementing some of the above strategies I’ve talked about will go a long way when it comes to confidence for all parties involved in the negotiation and due diligence stages.