Types of Buyers For Marketing Agencies
When selling your agency, it’s important to know which type of buyer is best aligned with what you want. That is why you should have an understanding of types of buyers of marketing agencies. There are three typical types of agency buyers. Of the three, they vary in reasons for buying, and they approach buying an agency with totally different goals in mind. Here’s a quick guide to help you navigate the types of buyers for your agency.
The Strategic Buyer
Strategic buyers are generally larger agencies looking for a bolt-on to their existing business. They tend to buy agencies for the following reasons: geographic location, industry vertical expertise, service-offering expertise, and amazing human capital.
We love strategic buyers because they already understand the ins and outs of running an agency. Not to mention, they are more likely to succeed in running the business post-transaction because of their previous experience. Strategic buyers also allow your team to be part of a larger growing ecosystem with new career opportunities. Lastly, they provide immediate cross-sell and up-sell opportunities.
While there are plenty of advantages with strategic buyers, there are a few potential negatives. This biggest disadvantage is that cash at close can be lower than with any other type of buyer. Coming in a close second is the simple fact that the merging of two company cultures can be challenging.
The Financial Buyer
These types of buyers often include Private Equity Firms and/or Family Offices. Almost always they have the goal of selling the business for a higher price in three to five years and aggressively pursue their agendas to maximize their investment return as quickly as possible.
We love to work with financial buyers for a few reasons. They bring external resources to an agency to supercharge growth. Also, founders often get to stay on board post-transaction, which is a great option if the founder would like to continue to operate day-to-day aspects of the agency. Additionally, if you make it through due diligence, deal structures can be favorable.
However, there are some potential negatives. Financial buyers generally use debt to finance, which can make the process as a whole take significantly longer, and due diligence is often much more extensive. Another potential negative is that they may not understand the agency space as much as a strategic buyer would.
The Solo-Entrepreneur Buyer
An entrepreneur buyer is typically someone who is buying themselves a job. A lot of the time, entrepreneurs are location agnostic, are interested in entrepreneurship but don’t want to build a business from the ground up, or want to add an agency to their modest investment portfolio. Solo-entrepreneurs pay top dollar for businesses and will typically be more devoted to the business than other buyers. These types of buyers are also less likely to sell the business.
Some potential disadvantages of a solo-entrepreneur acquisition are that entrepreneurs often require a lot of hand-holding during the transaction, and the chance of post-transaction success can vary greatly. This is caused by a lack of agency experience.
Post-Transaction Goals
Each seller has different goals in exiting, ranging from their transition commitment after the sale to maximizing price or maintaining the company legacy – and this is where matchmaking is critical. Remember, when selling your business it pays to know the buyer you want, and this starts with identifying your own goals.
- If you want a quick exit, you might want to have an entrepreneur or strategic buyer.
- If you want an amazing place to work post-transaction, a strategic agency buyer and certain financial buyers are most likely the right fit for you.
- If you want to supercharge growth, a strategic agency buyer or a financial buyer is likely the right fit for you.
- If you want the most cash at close, a financial or entrepreneur buyer is most likely the right fit for you.
- If you’re okay with taking less cash at the close in exchange for profit-sharing, a strategic agency buyer is most likely the right choice.
- If you want your team to have an amazing career after the transaction, a strategic buyer might be the way to go.
When you hire an advisor like Barney, our role is to provide you with as many buyer options as possible, giving you the freedom to make the right decision for yourself, your team, and your clients. There are a handful of options for buyers of your agency and it is important to spend time thinking about the right fit. Whether a strategic, financial, or entrepreneur buyer is ultimately the right choice for you, understanding your post-transaction goals and keeping an open mind throughout the process will help you land the right choice.
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Flexibility Is The Key To Sell Your Digital Agency
Selling Your Digital Agency? Why an Owner’s Flexibility is Key to Sealing a Deal
When you are looking to sell your digital agency, negotiating the sale will take time. That time will require more than just patiently waiting on the sidelines. It will require a back and forth that will see most owners giving way at some point, be it with regards to the selling price, payout terms, or the time it takes to complete a deal. Staying focused on the goal of completing the deal – rather than staying focused on a timeline or a price tag – will help ensure a successful transaction.
Your Transaction Doesn’t Live in a Silo
As promising as the performance metrics on the books may look, the growth trajectory of your agency is taking place in a complex environment comprised of many players. There will always be a market reality outside of your agency. And a buyer scanning the market will be well aware of this reality. It’s important to show you understand this in practical terms by adjusting deal terms and pricing in line with what the market suggests is feasible.
Your Agency Has More Than One Type of Buyer
While you may have your mindset on a specific type of buyer, market shifts mean that not only are price and deal terms a dynamic part of the equation, but the buyer type continues to evolve as well. Larger agencies looking to acquire your client portfolio may have been a classic buyer type in the past, but they are far from the only one nowadays.
Solo-preneurs, in particular, have reshuffled the deck. These high-net-worth experts are sitting at a corporate job or a large agency and are looking to apply their know-how and their network to scaling something they don’t have to build from the ground up. Keep an open mind as to who will be steering the ship following your departure and you will be sure to up your shot at getting the deal done.
Take It One Step at a Time To Sell Your Digital Agency
Flexibility won’t go far if you don’t have a healthy dose of patience when you go to sell your digital agency. Keep a leveled head as negotiations inch forward and continue to be calm post-transaction as well. Staying flexible with respect to how long you will be needed after the date of a transaction will help ensure smooth sailings beyond the moment of signing. Putting in the bare minimum of just 30 days to cash out fast is never recommended. A 90-day minimum that is ideally extended into the range of 6-12 months is optimal to make sure all parties’ best interests have been served.
One Step at a Time
An agency sale is not complete on the occasion of signing the deal. It’s important to understand what happens in the run-up and the post-sale and what sort of attitude can help all involved feel like they’ve hit a home run. Just like a solid workout demands a warm-up and a cool-down, no transaction is complete without buyer scoping, due diligence and transition period in the stages before and after a sale. And just like that workout, your sale will fall into place one step at a time. Staying flexible along the way means that you will be prepared for what the process will inevitably throw at you – and ensure sure that you’ll be there to answer the door when opportunity knocks. Ready To Sell?
