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.

Should We Disclose our Revenue, SDE & EBITDA in Our Ads?

Should we include our revenue, SDE, or EBITDA in our ads when trying to sell our business? We have a great story to tell, though it seems that including the revenue and net profits precludes us from telling our story because buyers may dismiss our ads if they see the numbers before hearing our story.

Generally, for small businesses:

Yes, we recommend including the gross revenue and cash flow (SDE) in your advertisements. (Mid-sized businesses require different processes and methods. To determine the correct way to sell your company, read our article on “Hunting vs. Fishing.”

Online business-for-sale portals display only a limited number of details — including asking price and cash flow — on the preview pages of their websites. An important component on the preview page that buyers consider is the cash flow.

Revenue, SDE, and EBITDA can significantly impact a buyer’s decision on whether to pursue a particular opportunity, let alone purchase that business. Most buyers are searching for a business with the lowest possible multiple.

And that makes sense. After all, wouldn’t you do the same if you were a buyer? In other words, wouldn’t you try to buy a business that would put the most money in your pocket for the lowest cost? Wouldn’t you be seeking the highest return on your investment?

Some business owners believe they have a “great story” to tell and that including revenue, SDE, and EBITDA in the ad precludes them from telling their story if it is dismissed at first glance.

Which business below would you be more interested in — Business A or Business B?

Business for Sale Portal: Preview Page

Business A

  • Ad Title: Amazing Service Business with an Amazing Story
  • Asking Price: $3,000,000
  • Gross Revenue: $7,500,000
  • SDE: N/A
  • Ad Copy: This is an incredible opportunity to own a business with an amazing story. Our business has been established for three years and … (only the first two to three lines show on the summary page).

Business B

  • Ad Title: 20-Year-Old B2B Service Business
  • Gross Revenue: $7,500,000
  • SDE: $1,000,000
  • Ad Copy: The owner is looking to retire. The business specializes in the manufacture, sale, and distribution of educational toys for preschoolers … (only the first two to three lines show on the summary page).

Still not convinced? Read on …

Table of Contents

  • Why Won’t Buyers Listen to My Story?
  • Selling Your Business — The Sales Funnel
  • It’s an Imperfect Marketplace

Why Won’t Buyers Listen to My Story?

Buyers won’t hear your entire story unless they click the ad to view the details. Only the first two to three lines of your ad copy show on the summary results page, so buyers won’t click to view your entire ad if they don’t initially like what they see.

Any buyer will quickly learn that every seller has a story to tell. Each seller believes their story is unique. Buyers, however, tend to hear the same stories over and over again.

Try playing devil’s advocate with yourself. Ask yourself the following questions:

  • If your business is so great, why are you selling it?
  • If your story is so compelling and will result in a surge of revenue, why don’t you hang onto it longer so you can realize the increase in value?

If you do have a story to tell, practice telling your story in as few words as possible. You should be able to tell your story in a 30-second sound bite. If you are using online web portals, you are limited to five to 10 words in the ad title and 50 to 100 words on the preview page. This does not give you a lot of space to tell your story. Hook the buyer with the first few words of your ad, or you won’t have a chance to tell your story. Learn to tell your story in a few seconds.

If you cannot tell your story concisely, the buyer won’t be able to either. Buyers often consult with others when deciding to buy a business. They must persuade their spouse, other family members, and professional advisors that they are choosing the right business to purchase.

Remember, if you cannot hook the buyer in the first few seconds of them reading your pitch, you have a slim chance of telling your story. Telling your story in a few seconds is critical. If you cannot do so, you will never have an opportunity to take the deal to the next step.

Selling Your Business — The Sales Funnel

To efficiently sell your business, consider the process as a sales funnel. The first step in selling your business is generating an interested buyer. For many sellers, this is the major bottleneck. In a sales funnel, the higher the step in the funnel, the greater the impact it will have on the end results. Because generating interested buyers is the first step in the funnel, this step, above all others, has the greatest impact on the chances of selling your business.

Invest the time crafting your marketing and advertising strategies. Selecting the appropriate gross revenue and cash flow figures doesn’t involve creativity and doesn’t take much time. However, writing the ad copy and an ad title should take a lot of time. While this step may seem unimportant, its importance cannot be underestimated. History is littered with writers — including Ben Franklin and Henry David Thoreau — who penned some variation of, “If I had more time, I would have written a shorter letter.” Conciseness doesn’t come easy, but it’s a key consideration in attracting readers and interest.

It’s an Imperfect Marketplace

Online business-for-sale web portals have made selling a business easier and more convenient for both sellers and buyers. More options and easier access to information make buyers more selective and more educated. It is still a straightforward, simple process to sell a profitable business with a reasonable asking price. At the same time, however, it is now more difficult to sell an unprofitable business with a story than it was 10 or 20 years ago.

Does advertising a business for sale without the gross sales or cash flow yield results?

We have tried this many times in the past, and, unfortunately, it rarely works. Without listing gross sales and cash flow, most buyers assume the business has minimal revenue, so they never bother looking at it.

Why do buyers look so closely at the SDE and EBITDA when looking for a business to buy?

All things being equal, would you rather buy a business with an annual profit of $100,000 or one with $1,000,000 or $10,000,000? Yes, buyers care about your story; however, your story takes time to tell, understand, and buy into. Cash flow, however, can be discerned in less than a second in an online ad. Most sellers struggle to succinctly and persuasively tell the story of their business in even a one-hour conversation.