— 7 min read

Since 2020, the number of Google searches for “selling a business” have continued to grow. Macroeconomic factors like a global pandemic, rising interest rates, and the wave of retiring boomers are an opportunity for investors looking to the middle market.

To find opportunities that don’t register on traditional business intelligence tools, dealmakers need to filter through the noise. These companies are often offline businesses with healthy financials that are invisible to investors, due to their lack of brand notoriety and small digital footprint. 

Important context for investors: The biggest marketing challenge these offline businesses face is bridging the online to offline gap and tracking the customer journey from the first online interaction through the final step, when the sale happens offline. 

There is a challenge and an opportunity in acquiring these types of companies. The challenge: they need improvements in their digital marketing performance. The opportunity: leveraging the best practices of digital marketing with the latest marketing tech and automation tools increases top line efficiency and market share with very low diminishing returns. 

To access traditionally offline businesses properly, dealmakers need to conduct in-depth marketing due diligence. Marketing diligence helps identify the strengths and weaknesses of a company's marketing efforts, and assess the potential risks and opportunities associated with the transaction.

Below is a quick breakdown of some of the aspects that differentiate  online businesses vs. offline businesses:

Conducting a marketing diligence review for offline businesses can uncover red flags and areas of improvement that can be actioned post acquisition. Remember, most of these businesses are profitable despite having poor marketing. Use the checklist below to identify what needs to be reviewed:

Website Review

  • Design and usability:  Is the website designed with the best UX practices? For offline businesses that rely on online lead generation it’s key to have a website that eliminates unnecessary friction and establishes trust. The website design should make it easy for the user to contact the business and get the desired outcome of getting a quote, appointment, or an at home visit. 
  • Landing pages: Landing pages are professionally designed web pages that are purposely designed for user acquisition on paid marketing channels. If the business does not have them, you will need to invest in building them post acquisition.
  • Loading time: Website loading speed has a direct correlation with lead conversion rate and sales. For offline businesses that rely on mobile, it’s key to review the mobile site loading times and make sure they load within 2-3 seconds.

Online Marketing Audit

Make sure to get access to all the advertising platforms and run a full audit of all the marketing channels. Here is what to check for with each channel:

Paid search 

  • Is there tracking in place to track leads sign up and phone calls? Are phone calls tracked with a 3rd party tool (see martech section)?
  • Are campaigns targeting the right audience by using all the targeting options such as geographic targeting, HHI, age , gender, interests? Are there any audiences that can be excluded?
  • Are campaigns optimized for lead signups and phone calls?
  • Are there dedicated, professionally designed landing pages for Lead generation or are users going to the main website?
  • Are campaigns optimized for top keywords and being tracked for the business KPI?
  • What is the share of voice for the top keywords? 
  • Brand traffic: How many monthly queries are showing for the brand term? Are brand searches growing or declining? This is a good metric to measure if the brand is on the rise or 

Paid social

  • What audiences are being targeted?
  • How are campaigns being tracked?
  • Does the company have high quality creative in place or is this another cost that needs to be accounted for in the future ?

SEO and Local Marketing

  • Business profile management across local directories: Is the business information accurate across directories, Maps and local platforms? Does the company have a customer review workflow to post customer testimonials? Are there various numbers to track phone calls by source?
  • Organic search: Has the company invested in SEO? What is the SOV that is being captured for top keywords on organic search in Google and Bing?
  • Are web pages coded with best practices of on page optimization?
  • How many high value backlinks does the website have?
  • Online reputation management: Is the company managing reviews proactively? Are there any bad reviews that will require investment to remove?

Marketing Operations

  • Lead response time: How long does it take the business to respond to an online lead?   
  • Appointment follow up: Is there any sms, email software to follow up with leads to ensure they show up to their appointment and reduce cancellation or drop off?
  • Post sale experience: Is there a workflow to get customers to post reviews online?
  • Customer database: (In industries that have repeat customers )How many customers are repeat customers vs. one off customers? How many 1st time customers have bought in the last 30-90 days?

Competitive Landscape

  • TAM: For offline businesses there are a few ways to calculate the business TAM. One way to do this is by using demographic data and 3rd party research. The problem with this methodology is that it doesn’t filter for actual user intent. A more accurate way is to instead estimate the SOM (Serviceable Obtainable Market) With Google Ads’ Keyword Tool.  Using Google you can run a keyword traffic analysis in the geographic areas where the company operates. Google will tell you how many monthly searches there are for the relevant search terms people are using. Being armed with this information during the diligence process will give you an estimate of how much more the business can grow.
  • Value proposition: Is the business pricing and service in line with the competition? Is there an opportunity to improve the brand and service and charge more?
  • Online Competitors: It’s key to know who you’ll be up against post acquisition. How competitive is the market that the business operates in? Some industries (Locksmiths, HVAC, roofing) have a very high online cost of acquisition. You could also find yourself going against a savvy and well capitalized competitor or worse - a venture funded platform or a national franchise.
  • Industry benchmarking: How does the average order value of the business compare to the industry average? How does the CAC compare to the industry average?

Marketing Technology (Martech)

  • Website CMS: Is the website built on a leading CMS?  Having the right CMS allows for easy martech integrations, built for fast loading speed and optimized for SEO and flexible design.
  • Marketing analytics software: Is the business tracking all marketing channels and is able to attribute CAC by Channels?  
  • Phone tracking: How are phone calls tracked? Ideally you want to have a system that can track performance by channel and performance within each channel. Having a 3rd party tool can help improve performance significantly post acquisition.

Image Source: callrail

CRM and Retention

  • Is the company using subscription software to increase repeat customers (wherever applicable)?
  • Is there a top tier CRM integrated across all the business?
  • Is the company using a top tier email and/or SMS marketing software ?

After reviewing all these marketing  steps you should be able to move to the final step which is creating a forecast:

  • Create worst and  best case scenarios of how much you can improve online performance post acquisition: Improving the website, optimizing ad campaigns and Martech improvement can often lead to double or triple digit improvements. 
  • Create a forecast on how much you could improve customer LTV  based on price increases and other changes in the products and services.
  • Calculate the investment needed to drive the digital transformation post - acquisition:Scaling growth is often followed by diminishing returns due to rising expenses, increased investment and competitors increasing their marketing spend to defend their market share.

How Grata Can Help

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