Fishing – Using Ad Portals

If Google is within reach, search for “businesses for sale.” What you’ll get in return in a fraction of a second is a myriad of web portals that exclusively list opportunities for prospective owners of small and mid-sized businesses.

These sites are the most effective means of marketing smaller firms for sale. And because these portals are frequented by your competitors and private equity firms, they also attract qualified buyers of medium-sized businesses. 

Never has it been so easy and efficient to reach potential buyers. But online business-for-sale web portals are a double-edged sword. While they make the process of selling a business easier and more convenient for sellers, they also open up opportunities for buyers. Because buyers have more options and access to more information, they are now more selective and educated. 

The success rate is impacted by two things: 

1. The attractiveness of your business.
2. The proper use of the web portal tool, including writing effective ad copy. 

On average, most of the businesses we sell through Morgan & Westfield receive 3 to 5 qualified responses per month. The most effective ads receive more than 10 to 20 responses per month. A slow ad receives 1 to 2 responses per month. 

Variables That Impact the Response Rate

You can tinker with several variables in your marketing strategy that can dramatically change the quantity and quality of buyers that show interest. Here is a description of the most critical variables.

Variable 1: SDE or EBITDA

Higher EBITDA or SDE equals more responses. Cash flow is critical to buyers. More than all other factors combined, cash flow determines how many responses you receive. My observations have shown that ads for businesses with lower cash flow multiples receive up to 10 times more responses than those with higher multiples. 

Variable 2: Asking Price

• Most portals require a specific price, so listing a range is not an option.
• At specific price points, buyers will have different levels of experience or sophistication. 
• A higher price point indicates a larger, more established business, and the buyers tend to be more sophisticated. 
• For businesses with lower asking prices, be prepared to deal with a more unsophisticated buyer pool. 

The asking price can significantly impact the number of responses because of the supply-and-demand principle. There are more businesses for sale in lower price ranges than in higher ones. Additionally, there are more buyers with $1 million cash than $10 million cash. 

Sophisticated buyers tend to conduct extensive research before deciding which business to buy. A sophisticated buyer may look at 100 to 300 or more companies for every acquisition they make. For example, a buyer of a $500,000 business may look at 20 other businesses for sale, whereas a buyer of a $10 million company may research and contact more than a hundred companies.

Businesses priced below $1 million tend to receive a fair number of financially qualified buyers. For businesses priced above $5 million, the higher the price, the more financially qualified and sophisticated the buyers tend to be.

Variable 3: Ad Title

The ad title is critical. The title of your ad should catch buyers’ interest and pull them in. I recommend tweaking and updating the ad title every 30 to 90 days. A revised ad title can double or triple the number of responses. Using a new or different ad title makes your business appear as a new listing on the portals and pushes it back to the top again. A revised title may spark interest from a buyer who merely glanced over it the first time around. 

For certain businesses, a simple title may work best. For other unique or esoteric businesses, a catchy title might be the most effective. 

An effective title can increase the number of responses by 100% to 500%. I recommend using a catchy, yet descriptive ad title. The idea is to catch the interest of qualified buyers. While the title shouldn’t be misleading, its primary goal is to induce qualified buyers to read your ad. Think about the unique aspects of your business and include them in the ad. This may take some consideration, but every business has something unique or special worth mentioning. 

The most effective ads receive more than 10 to 20 responses per month. A slow ad receives 1 to 2 responses per month.

Some successful ad titles I have used in the past include:

• Profitable B2B Marketing Company With 90% Repeat Clients
• High-Margin Service Company With Repeat Customers
• Profitable Coupon Business With Recurring Revenue
• Profitable B2B Niche Service With 70% Repeat Clients
• Rapidly Growing Home-Care Business
• Coastal Lifestyle Business
• Highly Profitable Non-Medical Home Care
• High-Growth Niche Metallizing Company
• Half-Century Old Niche B2B Service Business

Variable 4: Location

A business advertised for sale in Los Angeles County or Chicago will receive more activity than one for sale in a remote town in South Dakota. If it makes sense, market your business for sale in the nearest large metropolitan area. I suggest considering different markets when advertising your business for sale. For example, if your business is in a small city located two hours outside of Chicago, I suggest marketing it directly in Chicago. Businesses advertised in or near larger cities or metropolitan areas receive more traffic, and therefore more inquiries. 

Variable 5: Ad Copy

Confidentially marketing your business for sale is best done using nondescript copy to ensure your sale remains confidential. Ad copy that is intentionally vague will describe your business in generic terms and not disclose its identity. It wants to be descriptive enough to generate interest, but lacks the specifics for anyone to be able to identify your business. 

Most web portals display a limited portion of the ad copy, perhaps only two to three lines, before you click on the ad to view the full details. If you have a story, tell it in as few words as possible because space is limited here.

Passion + interesting + exciting = increased buyer response. Describe your business with passion. Don’t just list its mundane features. Your ad should highlight the benefits and interesting aspects of your business. It should sound exciting and point out the compelling features of your business, such as location or how the products and services you offer are unique. 

Use the ad to briefly describe what your business does and why it’s an attractive investment. Put yourself in the buyer’s shoes – what would catch your attention? What do you like the most about your business?

I recommend experimenting with different text in the ad copy. The ad copy needs to be crisp, concise, and on point to increase responses to your ad. While longer ads receive fewer responses, they tend to attract a more qualified buyer in terms of interest. The key is balance – there should be a balance between quantity and quality.

Describe your business with passion.

Variable 6: Financing

Financing will be an important consideration for most buyers, so how you address this topic in your description can impact how many potential buyers consider your business.

• Seller Financing: Buyers love sellers who are willing to finance a portion of the sale. I’ve consistently found that ads for businesses for sale that offer seller financing receive significantly higher responses.
• Small Business Administration (SBA)/Bank Financing: Businesses that have been pre-approved for SBA financing also receive more responses because they require a lower down payment and therefore generate a higher cash-on-cash return for the buyer.

Variable 7: Industry

On most portals, you can decide what category or industry to position your business in, such as health care, tech, retail, service, or manufacturing. The categories are usually broken down by industry type. 

The category should be carefully selected. For highly specialized businesses that can be sold to an industry outsider, it may make sense to position the business in broader categories outside of your industry that are more popular than your niche. I also recommend positioning your ad in multiple categories if it’s allowed, which exposes your business to a wider range of buyers. 

Variable 8: Annual Revenue

Buyers assign more importance to a business’s EBITDA or SDE than to its revenue, as margins vary widely from industry to industry. In fact, some business-for-sale portals no longer display the gross revenue on the search results. Gross revenue, however, still appears in the text, but is visible only after a potential buyer clicks on the ad to view the details. 

Increasing the Number of Responses

Consider the following:

• Include your SDE or EBITDA in the ad.
• Price your business reasonably.
• Develop a short, catchy title.
• Market your business in a nearby sizable metropolitan area, if possible.
• Write a concise ad with a bulleted list of the highlights.
• Offer seller financing or have your business pre-approved for SBA financing.
• Reposition your business in multiple categories, or occasionally switch categories.

You should also consider updating your ads to increase the response rate. A fresh ad and revised marketing tactics often lead to more successful results for the following reasons:

• Reposting the ad with a new ad title and image makes your business appear as a brand-new listing. This leads to responses from people with whom you have not yet connected.
• Repositioning the ad under new categories will also expose your business to a new subset of buyers who have not yet seen your company.
• Removing your original ad and posting a new one will push it to the top of the list again.