Mergers & Acquisitions

Resources: M&A Encyclopedia

Comprehensive articles on every step of the process of buying or selling a business from the most exhaustive encyclopedia of M&A articles in the industry.

Marketing a Small Business for Sale

If you’re near Google, go ahead and 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.

If your business is for sale and it isn’t already among the listings on the portals that are most relevant to your offering, it should be. That’s because 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 it’s what you do in conjunction with your listing that will make the difference between attracting qualified shoppers or getting glossed over.

In the article that follows, we’ll show you what information to include in your post and how to write an effective ad, based on our years of success with these marketing tools.


Table of Contents

  • Why Buyers are Now More Selective and Educated
  • Create Effective Ad Copy
  • Average Number of Inquiries
  • Variables that Make the Biggest Difference
    • Annual Cash Flow (SDE)
    • Asking Price
    • Ad Title
    • Location
    • Ad Copy
    • Financing
    • Industry
    • Annual Revenue
  • What Can I Do to Increase the Number of Responses?
  • Updating the Ads

Why Buyers are Now More Selective and Educated

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 as a result.


Create an Effective Ad Copy

Use nondescript language

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

What can you do to write more effective copy?

Make it sound as interesting and as engaging as possible. Writing an effective ad will take some effort, but it will be time well spent.

If you’ve decided to sell your business using business-for-sale portals, then writing attractive, engaging ad copy is critical. An effective ad is short, straight to the point, and sparks the interest of potential buyers.


Average Number of Inquiries

How many inquiries should I expect to receive?

On average, most of our businesses receive three to five qualified responses per month. The most effective ads receive more than 10 to 20 responses per month. A slow ad receives one to two responses per month. Keep in mind that it only takes one buyer to sell your business.

While writing effective ad copy is important, the attractiveness of the business is also a key factor in determining how many responses you will receive.


Variables that Make the Biggest Difference

Several variables in a marketing strategy can be tinkered with that can dramatically change the quantity and type of buyers that show interest.

The first four variables — profit, asking price, location, title — are the only criteria that viewers can see from the preview page of your ad on most portals. If they don’t appear on your preview page, no one will click your ad, so it’s critical these details are optimized first.

Annual Cash Flow (SDE)

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

Asking Price

  • The portals require that we list 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 $1,000,000 cash than $10 million cash.

Sophisticated buyers tend to conduct extensive research before deciding which business to buy. A sophisticated buyer may have looked at more than 100 to 300-plus 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 $1,000,000 tend to receive a fair number of financially qualified buyers. For businesses priced above $5,000,000, the higher the price, the more financially qualified and sophisticated the buyers tend to be.

Ad Title

The ad title is critical. The title of your ad should catch buyers’ interest and pull them in. We 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. 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%. We 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.

Some successful ad titles we 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

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, try advertising your business for sale in the nearest large city. We 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, we suggest advertising it directly in Chicago. Businesses advertised in or near larger cities or metropolitan areas receive more attention.

Ad Copy

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 very limited here.

Passion + interesting + exciting = increased buyer response. Describe your business with passion. Don’t just list the boring features. The 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.

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

We recommend experimenting with different text in the ad copy. The ad copy should 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.

Financing

Seller financing

Buyers love sellers who are willing to finance a portion of the sale. That’s why we recommend that you offer seller financing. We’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 generate a higher cash-on-cash return for the buyer.

Industry

On most portals, you can decide what category or industry (e.g., health care, tech, manufacturing, etc.) to position your business in. 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 that are more popular. We also recommend positioning your ad in multiple categories if it’s allowed, which exposes your business to a wider range of buyers.

Annual Revenue

Buyers assign more importance to a business’s cash flow 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.


What Can I Do to Increase the Number of Responses?

  • Include the SDE or EBITDA in the ad
  • Price the business reasonably
  • Develop a short, catchy title
  • Advertise the business in a nearby sizeable metropolitan area if possible
  • Write a short, to-the-point ad with a bulleted list of the highlights
  • Offer seller financing or have your business pre-approved for SBA financing
  • Try re-positioning your business in multiple categories, or occasionally switch categories

Updating the Ad

If you update your ad, the business may appear as a new listing and be pushed up in search results. This allows us to connect with people who we’ve not connected with before. We can also remove the ads entirely and repost them, which pushes them to the top again.

How often should I revise my ad?

You should modify your ad if you receive fewer than one or two pre-screened buyers per month or if there are major changes in your business. If you don’t see a positive response to your ad, we recommend updating it every 30 to 60 days.

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