“All this business needs to grow is marketing. I just haven’t been able to afford it.” Though I recently heard this comment from Tom (not his real name), I have heard the same comment dozens, or maybe even hundreds, of times.
Tom had called me for advice on how to sell his Nashville-based business. He was in his early 60s, not the type who looked like he was ready to retire. But Tom was tired. The business almost collapsed during the recession of 2009-2010, but in recent years had stabilized. Tom explained, “The rebuild process was slower and harder than I anticipated. But, I got two kids through college while we were getting the business back on track, so I guess I was doing a few things right.”
Tom and I were discussing the process to sell his company. I explained that the starting point of a successful transaction is a memorandum explaining the company’s history, financials, organization and growth plan. I told him potential buyers always want to see a plan for growth. And when I say a plan for growth, I mean a specific, tangible and believable plan to bring in new customers. That’s when Tom said his business would add new customers if he just had more money for more marketing.
There are three problems with this plan: it’s not specific, tangible or believable.
But the truth is not having a plan for growth isn’t Tom’s biggest problem. You see, Tom’s answer reflects an existential problem with this business: it doesn’t generate enough money for marketing. When I see a business that cannot afford marketing, I see a company that is, best case, in a dull holding pattern, or worst case, in or near a death spiral.
A healthy business generates sufficient cash flow to fund ongoing new customer acquisition. So when I write memorandum before I take a company to market, I take extra care to understand their customer acquisition plan. I want to explain who the ideal customer is, how the company obtained that customer and their cost to do it. From that, I derive the company’s formula for new customer growth: for X amount of marketing, we will gain another X number of customers which should translate into X amount of new revenue. Specific, tangible and believable. Having a plan like this will bring a premium when the seller takes his/her company to market.
“Ok Jim, I see your point, specificity is important,” Tom said, “but how many companies can actually do that? That’s pie in the sky thinking.” I had to admire Tom’s honesty, and he was right. Not many businesses can be specific about their plan to grow to the next level. That’s why I so often hear the “more marketing” answer. But without a plan, or the business model to fund the growth plan, the business isn’t sellable for meaningful value. After all, who wants to try to catch a falling knife?
JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. https://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 . He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The story above is true, but the names and fact patterns above have been changed to preserve the parties’ identities.

Tennessee Valley Group

Latest posts by Tennessee Valley Group (see all)
- The Conundrum of the Profitable, Yet Unsellable Business - February 1, 2025