buying a digital agency

So you’re buying an agency … congratulations! Marketing agencies (especially digital agencies) have never been in greater demand, and your chances of success are high – especially if you acquire an agency with a strong reputation and healthy customer base.

If you have never owned a business before, or are new to the agency world, you might be wondering which type of agency to target. The sector is dynamic and constantly changing (perhaps this is what attracted you to it in the first place).

This article will provide you with an overview of the types of digital agencies you have to choose from. Just as importantly, it will recommend some actionable steps for figuring out which of these categories is the ideal fit for you – whether you’re purchasing a business for the first time, or already own a successful business and want to add another to your portfolio.

Zooming In: Types of Digital Agencies by Service

There are many types of agencies, from service- oriented and vertically integrated to pure marketing SaaS and many more.

Before we walk you through some practical tips for deciding which business to buy, let’s examine three categories of digital agency and the potential upsides of purchasing them.

The industry is exploding with ideas and growing exponentially, so we won’t attempt a comprehensive categorization. But the following are well established, distinct subtypes with high product-market fit and thriving demand.

Sounds like a good place to start, right?

SEO Agency

The SEO (search engine optimization) agency is one of the largest digital marketing agency subset. This type of agency has defied the odds to thrive in a changing marketplace.

The fact that we probably don’t need to tell you what an SEO agency does is solid proof of how firmly the concept of SEO has taken root in the public consciousness.

Buying an SEO agency has its advantages: the process of constantly making and testing changes to the design of clients’ websites means recurring business in addition to high average monthly income.

Another plus for those with existing companies: owning a business whose business is helping other businesses’ visibility has the opposite effect of making your company invisible.

Social Media Marketing Agency

Can you say “viral?” Social media marketing firms are a bit like the SEO agencies attractive younger siblings – though they now have target audiences in every age demographic.

As you can guess, these agencies market their clients – and often themselves – on social media networks such as Facebook, Instagram. TikTok, Twitter, LinkedIn, Snapchat, and Reddit. Most of them also use blogging and offer some degree of influencer marketing.

Growth is baked into the business model of this type of agency. If you buy one that is good at upselling new platforms to its clients (see TikTok above), you might even be able to scale your services.

As with SEO agencies, social media marketing agencies are useful investments for buyers who already own a business and want to get more visibility for it.

Lastly, as the name indicates, these agencies are social animals. Establishing and nurturing strong relationships with their clients and their clients’ clients is what they do best. This makes for excellent client retention, which in turn means healthy recurring monthly revenue.

PPC/Inbound Agency

This last type of digital marketing agency we’ll cover is a different kind of beast, but a very friendly one. The name of the game for PPC/inbound agencies is inbound marketing focused on generating ROI (return on investment). Once considered avant garde, in 2020 these agencies are growing like bananas from Chiquita.

The companies they serve demand results and these agencies specialize in it. The most successful and desirable ones to purchase have built incredible efficiencies through API’s of great software or even built their own SaaS to close the gap on demand and results.

Knowledge of current clients, client retention rate, and retainer revenue vs. project revenue are uber important when comparing agencies for sale of this type. Do they churn and burn or nail it nearly every time?

Inbound agencies are terrific investments for both beginning and experienced buyers. These businesses tend to be scalable, and as such can provide revenue and growth for years to come.

Buying an Agency for First-Time Buyers

Are you a first-time buyer? Every buyer is different and brings his or her own passions, skills, experience, location, and financial standing to the negotiating table.

Your first step in answering this question should therefore be to consider all of these unique factors and make sure that a digital agency is a good match for them. Hint: the more flexible and creative you are, the better!

Step two is to drill down to find the right type of digital agency. Try browsing agency sales listings and filtering for agency type, price, revenue, net income, and age. This will give you a feel for the market and provide a springboard for a conversation with a broker or M&A Advisor.

Agency Purchase for Seasoned Business Owners

If you already own a business, you probably already know what kinds of businesses are compatible with you. But what about the various types of agencies? This is where it gets more complicated.

To start with, you should determine what type of agency would combine well with your existing business. Think in terms of synergies. Which agencies will enable you to up-sell services from your current company, and vice versa?

If you have already narrowed down your search to specific companies, compare each ones’ employees and ask yourself: which complements or augments the capabilities and personalities of those who are already on my payroll?

Browse our businesses for sale to get ideas for how to grow your business through buying another company. It could be a geographical expansion or an expansion of products or services offered. Weighing all of these factors will guide you towards the perfect business purchase.

If your budget allows, consider off-market deal sourcing from a credible advisor.

That’s a Wrap!

To sum up: digital marketing agencies come in numerous shapes and sizes. The tips in this article will help you identify which one is the perfect purchase for your needs as a buyer.

When it’s time to take the next step, connect with our buy-side sister company – Oliver. They’re your team’s dedicated buy-side advisors, sourcing direct-to-founder acquisition opportunities customized to your needs.