When Buying a Small or Midsize Business: Don’t Forget About the Digital Assets

There are endless opportunities in the U.S market to buy and sell small and midsize businesses.  A total of 7,842 closed transactions occurred in 2016. Not only was it an 8.6% increase from the year before, but a record year overall.  The findings were part of BizBuySell’s Annual Insight Report.  Two reasons for the healthy uptick are buyers are looking to pick up deals and acquire profitable, sustainable companies and sellers are looking to get out on a high note.

During the initial phase of a purchase, the buyer typically should execute a comprehensive due diligence plan.  Most buyers will look at obvious things such as researching any litigation against the company, its balance sheets, its outstanding debt.  However, many times, eager business buyers overlook one of the company’ s most important assets.  Those would be its digital assets.

Digital assets are things such as:

• Websites
• Social channels
• Third party management tools
• Blogs
• Images
• Articles
• Local listings
• Hosting accounts.

A buyer should exam these things closely and evaluate them on:

• Quality and History
• Brand Recognition
• Effectiveness
• Value
• Cost of Maintenance

It’s good practice to bring on a professional who can analyze the digital assets of a company.  Unless you work in marketing day in and day out, there will be a huge learning curve and endless amounts of information you need to consume to make critical analyses and informed decisions.  Business buyers are advised to include the cost of bringing on a professional digital marketing analyst into their acquisition expenses.

Questions to ask when evaluating each asset.

1. Is it owned or earned media?
   1. Owned media are things such as digital images and videos, email lists, local listing, website.
   2. Earned media are such things as word of mouth engagement online, email lists, and social media followers.
2. Is it high quality?
3. Does it cost anything to maintain.
4. Does it assist any way in driving customers to the site or directly to the business?
5. How much revenue does it generate.
6. How is each asset performing?
7. How much does it cost to maintain?

Things to consider

1. Is the marketing handled by someone internally or is an outside company handling it
2. What is the current monthly cost of this strategy
3. How well is this strategy working?
4. Is there room for improvement?

Brand recognition

1. Are people familiar with the brand
2. What is the business’ online reputation
3. Do all the assets work to deliver a consistent brand
4. Does the brand add value to the business

Effectiveness:

1. How effective is everything working
2. Are all operations following best practice for their particular marketing channel
3. What is the monthly ROI and annual ROI
4. What tools are being used to measure
5. Is it or can it be automated?

From these previous items you should be able to establish the value and how much the cost will be to bring the entire apparatus up to speed if it is lagging in any parts.

Don’t Wait Until the Ink is Dry to Take Control:

By the time of closing, new owners should have complete control over the selling company’s digital assets.   But don’t stop at access when it comes to these systems.  it’s important to immediately check the access privileges and remove anyone no longer affiliated with the company or its vendors.  It is not uncommon to find old employees, old marketing firms and random other individuals who might over the years have been granted access.

Common Problems Encountered:

Business doesn’t own domain:  Many times I’ve come across business owners who thought they owned their domain but actually didn’t. Typically, it was in control of the marketing or web design company that initially set up the website. If you buy a company and don’t own the domain, it might cause some headaches for you depending on the value of the website.

Poor Reviews:  Every company is going to get a few bad reviews now and a again.  But has the previous owner addressed the poor reviews?  Are they recent? How bad was the situation?  You don’t want to walk into some one’s shit storm.

No System or Strategy:  Even the smallest business needs to have a marketing and sales system in place for generating business.  And it needs to be evaluated and optimized regularly.   Often times a business will have the channels set up but they won’t be working collaboratively together and evaluation of their effectiveness is ignored.

Poor Quality Content:  Whether its poor images, articles or videos, if the content is sub par you can expect needing to invest into those items.  Also some businesses I shudder to say have no content.

Hopefully, this year will be another stellar for small business sales and startups.  If you decide to take the plunge email me or connect with me on social with any questions or ideas.

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