When you see an article about a product or service do you generally find it more credible than a print ad for the same product or service? It's stating the obvious that research shows that most of us do. An article in a respected publication has more credibility because we know that generally it has not been paid for, and while a reporter may have based the article on a press release from a company the reporter will discern whether the story is news worthy, verify facts, look at the information critically, and often seek out independent supplemental information.
However, getting TV and radio interviews or articles written about your company, product, or service don't usually happen serendipitously. Most companies that get attention in the media do so because they proactively promote this coverage. This can be through submitting press releases to the media, media kits, and building relationships with members of the media. Is your company doing this? If not, why not? Is it because you lack the time or expertise? I'll let you in on a secret: most of your competitors that get more press don't have that expertise, either. They outsource this to PR firms.
Magazine articles, newspaper stories, TV & radio interviews, and third party blog posts can all have a significant marketing impact for your business, and if, as a result, your business generates more business and profits, it will increase both the value and marketability of your business. However, from a business broker's perspective there's another more direct way that this can increase the probability of selling your business for a higher price. When I help sell a business, my confidential information package includes a section on publicity the business has received. Having press from credible third party news organizations that mirrors what the business broker says about the company gives a business buyer greater confidence in the business, decreases uncertainty, and lowers their perception of risk.
How much might the greater publicity be worth? Let's assume a business last year had $5 million in revenue and a 20% EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) margin. If business attributable to greater press resulted in a revenue increase of 5%, that would equate to $250,000 more in top-line numbers and an increase in EBITDA of $50,000. To keep things simple for this illustration, let's assume that nothing else contributed to an increase in revenue, so overall the company had $5.25 million in revenue this year. Let's also assume that businesses in this sector sell, on average, for 5x EBITDA. This means the value related to the direct increase of revenue from the PR efforts contributed $250,000 of value to the business. However, what if, through a perception of lower risk and greater comfort with the business as a result of press the company received, a business broker was able to get the buyer to pay a price that was just 3% higher? It would add an additional $187,500 of value ($1.25 million in EBITDA X 5 X .03). So in this hypothetical illustration the business owner would receive $50,000 in additional EBITDA this year, $250,000 in additional value related directly to the increased level of EBITDA, and $187,500 in overall increased value due to greater confidence in the business by the buyer, for a total of $487,500.
If you are not engaging a PR firm but would like to consider doing so, Codiligent business brokers would be happy to make a referral.