What’s the story you tell the market about your company?
Your story is the way you position your business to anyone who asks. It’s the description you use on your website, the elevator pitch your salespeople use to win a meeting, and the explanation you give when someone asks about what you do.
It’s worth investing time in getting this narrative right. A thoughtful narrative can help differentiate your product or service as a premium offering in the minds of consumers in the short run and have an impact on the value of your business over time.
How Happy Marketer Avoided the Service Company Discount
For example, Prantik Mazumdar and his partner, Rachit Dayal, had built their Singapore-based agency, Happy Marketer, up to more than $10 million in sales when they decided to shop the firm. To represent them, Happy Marketer chose SI Partners, a U.K.-based M&A shop specializing in selling marketing services firms.
As SI got to learn about Happy Marketer, they came to discover the firm did much more than execute digital marketing campaigns. Happy Marketer also had a strategy division where they partnered with Boston Consulting Group to help large companies transform themselves into a digital world. They had a training division where Happy Marketer helped company managers learn how to use applications like Google Analytics. They also generated cash from reselling Google software in Asia.
SI understood that software sales and training often attracted much higher multiples than a traditional services business. SI estimated Happy Marketer’s software revenue could be worth more than ten times EBITDA to a buyer and their training revenue could fetch seven to eight times EBITDA, while their digital execution work might only get three to four times.
To avoid being lumped into the lower value digital execution category by acquirers, SI positioned Happy Marketer as a data-driven agency with depth in software, analytics, and modeling.
SI told the story of how marketing had changed. Long gone were the booze-soaked lunches of the past, where agency principals convinced their clients to invest more in difficult-to-measure mediums like television advertising. Instead, SI explained why savvy marketers are investing in digital campaigns, where every expenditure can be precisely measured. SI pitched Happy Marketer as being on the cutting edge of this new data-driven world.
The shift in positioning worked as Happy Marketer attracted a variety of offers, including one they accepted from the agency conglomerate Dentsu Aegis Network. Dentsu paid around seven times EBITDA for Happy Marketer, a significant premium over what a traditional marketing services firm would sell for.
Understand what acquirers are willing to pay for various types of companies in your industry, and position your firm as a leader in the highest-value categories. Customers will pay a premium in the short term, while acquirers will place a higher value on your business when it comes time to sell down the road.