Here's Why You Should Consider Phantom Equity When Selling Your Agency

The Very Real Promise of Phantom Equity

The terminology may frighten some away. But phantom equity, especially when it comes to selling your agency, has the potential to breathe new life into your agency. The upsides are well worth taking the time to ensure that phantom equity is anything but elusive to you. Make phantom equity work to your advantage by using it as the adhesive that binds essential human capital to your agency long-term, especially post-sale, promising profit shares in return.

What Is Phantom Equity and Why Does It Matter When Selling Your Agency?

Phantom equity is both equity and not equity. It offers the benefits of company stock without actually issuing any. Known also as “phantom stock” or “virtual shares”, they offer deferred compensation in line with company performance much like actual stock would. And much like actual stock, this equity will vest over time and according to an agreed schedule. However, unlike actual stock, phantom equity never offers the opportunity to exercise a voting right; they are financial-only. This means holders of phantom equity don’t sit on the cap table, carry no liability and, as such, pose practically no added legal requirements or costs to get set up as phantom stockholders.

Should I Take Advantage of Phantom Equity When Selling My Agency?

If you are considering selling your agency and you’re an owner who is looking to stay on long-term, phantom equity makes perfect sense. Phantom equity ensures that a founder – or any other essential team member for that matter – stays on, stays committed and stays a part of the continued growth story even after a sale and post-sale transition period have been completed. Offering phantom stock in the business post-transaction offers an objective guarantee, aligning buyer and seller incentives for continued success.

After all, human capital is the key component to the business that was just acquired. Keeping the engine room of an agency firing on all cylinders means binding that human capital to the agency’s continuing journey down the growth path. Especially when the agency is a smaller business – approximately 15 people or fewer – the value of each team member tends to be magnified. Binding essential team members to the long-run success can be a sure-fire win-win.

When Does it Make Sense to Avoid Phantom Equity?

If you are looking at selling your agency but do not plan to stick around for the long haul once your agency has been sold, then phantom equity may not be for you. Even a full year of commitment post-sale is not in alignment with the purpose and likely vesting schedule of phantom equity. Generally speaking, it takes a minimum of a three-year commitment for phantom equity to really begin to pay off.

In addition, if a buyer only wants to incentivize team members that stick around for an agreed minimum period that extends beyond the start of the vesting schedule, they may want to consider a cash bonus plan instead. The reason here is that these are generally forfeited altogether when an employee leaves whereas the vested phantom equity could mean having to pay out somebody who left sooner than a buyer might have liked.

The Bottom Line

The initial post-sale transition period of, on average, 90 days is tied into every deal. What happens beyond that is down to the interests and alignment of seller and buyer. If the interest is there for a seller to stay on board long-term and keep reaping the benefits of an agency’s ongoing growth story, the direct path to participating in the profits to come, is phantom equity.

by Amanda Dixon

How to Grow The Value of Your Marketing Agency Without Raising Revenue

Top-line growth is only one end of the P&L statement. Agency owners that are not just sales-minded but understand operations just as well, know that their margins can be improved elsewhere too. Although an early-stage agency will need revenue to demonstrate traction and proof of concept, a company with enough track record – and one that is looking to sell – needs to do better than that. EBITDA will take center stage for a buyer looking under your financial hood – and there is plenty of ways to raise the roof on your EBITDA without having to drive sales. Especially in the current market environment that is still demonstrably shaken up by the ongoing pandemic, structural readjustments and remote work are redefining operations. If you are looking to drive up your bottom line as you line up a sale, we recommend you take a closer look at our five hacks to grow the value of your marketing agency without the need to raise revenue.

Five Hacks To Grow The Value of Your Marketing Agency

The Roof Overhead is an Overhead

Office leases, in particular, are dead weight in the current market environment. Long leases are not integral to the business of most marketing agencies – something that is especially obvious since 2020 and the proof of remote work as a key component of agencies in the digital age. As tools to work remotely become smarter and employees become more accustomed to them, it is worth reconsidering if that office lease or that prestigious address on the business card are worth their costs. No less, co-working spaces, insofar as they are open for business, offer a smart and flexible alternative. Why not survey your team to see how many days a week they would be happy working remotely and scale down accordingly?

Automate Where You Can

Automation and streamlining are essential ingredients to your margin improvement. Revisit your processes, workflows and operational architecture to check on where there is still room for automation improvements. Tasks that should raise the automation flag include tasks that involve compliance and audit trails, that require multiple people to execute or that are especially time-sensitive.

From invoice generation to time tracking and from automated workflows to streamlined communication through project management tools with automated notifications, the world of process automation is yours for the taking. Things to keep in mind are that no tool is a cure-all and any tool is only as good as its implementation. Set goals, assign accountability and measure your results over time. Your reduced likelihood of error and improved productivity will work its way into your margins in the medium to long term.

Improve Your Brand & Increase Prices

When was the last time your brand got a shake-up? Are your website and your logo still a little too close to when you first launched? It shouldn’t take a Fortune 500 company in the public eye to make rebranding relevant. Give your look and feel a lift that will strengthen your positioning as you gear up a sale – and that can help you justify giving your prices a lift along the way.

Invest In Your Team

Most importantly, take a good look at your team. They will be the ones carrying your agency not only over – but past – the finish line as you execute on a potential exit. Who are the top-tier candidates that will shoulder your agency and drive the marketing agency at this critical juncture? Invest in these individuals and shed any excess weight as you close in on the valuation home stretch and grow the value of your marketing agency.

Future-Proofing In Times of Crisis

It may be a cliché, but that doesn’t mean it’s not worth taking note: there is opportunity in crisis. Even if you are not looking to make a sale just yet, these are things you can do to improve your operational resilience. Take advantage of the current reshuffle. Let it serve as an eye-opener as to how to cut costs and restructure your agency to help bring the value of your marketing agency to where it needs to be so you can turn it into a listing no buyer would overlook.

by Esther Townell

M&A Timelines: How Long Does It Take To Sell My Marketing Agency?

When you finally say to yourself, I want to sell my marketing agency, you may think that things will move quickly. But the reality is that the waiting can be long and is often the hardest part. Normally – the Barney M&A timeline in its entirety is 4-6 months. However, knowing exactly what happens before, during, and after the sale of your marketing agency should provide the transparency you need to help you manage the process. Here, we help you understand the necessary steps – and the expected timeline attached to each of them – so that you can get a clear understanding as to how long it takes to sell your marketing agency.

Sanity Check

First things first. Before you jump into the deep and run the risk of amping up the expectations, you may want to ensure that you are ready to sell in the first place. Has your agency been showing sustainable growth, year-over-year? Are your margins raising eyebrows or just red flags? Are you delivering an EBITDA of $500k and up? If you need a quick reality check and a reminder of what an agency buyer will be looking for in the first place, take a look at our article dedicated to just this here.

The M&A Timeline to Triumph

While there is some flexibility around the exact duration of each element required to make the sale of your agency a success, the process that will take you there is very defined. The Barney M&A process in its entirety is 4-6 months. Here is the step-by-step:

Initially, there is a valuation period before any agency owner enters the circle of sellers. This period requires the vetting of financials to get an accurate picture of what’s on offer. Once a price is agreed upon, the listing agreement is prepped and signed before a listing goes live. Expect this readying stage to take up to 1 week.
Once your listing is live, it’s showtime. We do our homework on who would make the perfect fit before we scour the network to align your positioning and performance with a buyer’s long-term goals. We give this stage a solid month to generate enough leads in order to begin issuing a first term sheet.
Once there is a genuine offer in place, expect a further two weeks to transform those initial leads into a detailed LOI.
Finally, turning a serious buyer’s intention into a closed deal will take…well, it will take the time it takes, really. The due diligence timeline is correlated with a buyer’s thoroughness and a seller’s previous processes. As a benchmark, we attach an expected duration of 45 days – but that can move in either direction. Expect to be able to improve on this timeline with more sophisticated buyers that have gone through this before. In addition, the required paperwork to close a deal will be produced during this 45-day window, which takes into account a small buffer for the required back and forth.

M&A Timelines Vary

Depending not just on the experience but the type of buyer, the pace of the process can move in either direction as well. Strategic buyers with an eye for an operational fit will typically move faster while entrepreneurial types will take more time as they are likely entertaining more options. Financial buyers will put their targets through a Quality of Earnings report (think of this like a mini-audit), which can add another 3-5 weeks to the process.

Beyond getting the alignment right, which is something out of a seller’s hands, a seller can help shorten the M&A timeline as well. If a buyer and seller remain in agreement with the initial closing docs, and if a seller is well-organized and on top of his operations and financials during the due diligence process, this will help drive up confidence and drive down duration.

Understanding The M&A Timeline For Digital Agenices

by Esther Townell

How To Evaluate Your Digital Marketing Agency Like A Buyer

Think Like A Buyer When Evaluating Your Digital Marketing Agency

Did someone say, “seller’s market”? Yes, indeed, we did. Now, does that mean your agency is automatically at the top of every potential buyer’s list? Unfortunately, not. Or, “thankfully not”, is what we ought to be saying since making the right kind of match happen is where long-term success rests. In other words, long-term success is about making sure that you don’t even begin the buyer-seller dance with buyers who aren’t suited for your offering. So, how can you make sure that there is an alignment of offer and potential buyer, how can you improve your digital agencies valuation, and finally, does your agency offer what a buyer wants?

Think Like A Buyer When Evaluating Your Digital Marketing Agency

We’ve put together a list of key items that will entice just about any agency buyer, and that an agency owner can consider as transactional glue on their way to seal the deal.

Retainers Over Projects: Retainers spell income visibility. Projects, while potentially lucrative in the short term, also spell potential volatility. To keep them coming in, the required sales effort and associated costs add to the challenge of making a dependency on projects look like an attractive prospect. Of course, a mix of both is not in and of itself unattractive, but keep the balance solidly tilted on the retainer side. Pay special attention, all you SEO and PPC agencies, as this speaks directly to your business model.

Year-Over-Year Growth: This isn’t Silicon Valley, and your agency is not a SaaS startup. Agency buyers are not the VC types looking for triple-digit percentages growth. Steady does it – because steady growth means managed growth. It means your growth was not part of a fad or a fluke. And it means that your growth is not only sustainable but responsible. Growth is not an isolated metric; it’s tied to everything from hiring and overheads to your value proposition and your sales cycle. When all these things are in line, your year-on-year growth will be a sign of stability, skill and success.

Sustainable Margins: In line with this kind of well-managed growth, come sustainable and reasonable margins. Reasonable because repeatable. No buyer wants one-off success. Buyers are looking for structured businesses, not side gigs. That means functioning operations and an engine room that keeps churning out an EBITDA of 20-35% – with some margin for crisis-based deviation.

Processes Over Relationships: Processes mean success is business-owned and won’t leave the business as an owner takes their final bow. Success that is tied up in specific relationships, is not transferable – and not repeatable. Think of it this way: can a new owner, with the same skills as the current one, continue to scale your agency? That’s your litmus test right there.

Challenge Yourself to a Pre-Mortem and Improve Your Digital Agency Value

There are plenty of buyers available on the market right now, so that won’t be where the failure to sell your agency lies, so challenge yourself to this pre-mortem scenario: it’s 6 months from today and you weren’t successful in finding a buyer in spite of actively trying to sell your agency. What did you do wrong? Turn our buyer’s wish list into your seller’s checklist to improve your digital agency value and make sure your agency’s offering is aligned with what buyers are after.

by Emily Zekonis

Why Honesty Is Essential When Selling An Agency

Are you selling an agency? There is one thing above all else that you can do as an agency owner to help make the sale of your agency, and the ensuing transition period, as smooth as Sunday morning jazz: Be Honest. A serious buyer will always do their homework – and a minimum 45-day due diligence period is guaranteed to reveal anything they weren’t able to uncover upfront. Better still, find out what is of particular importance to a buyer so you can be transparent about those key issues in particular. Not entirely sure what those are? We have a pretty good idea.

Selling An Agency Rule #1: No Surprises

Align your communication with your true intentions once you are no longer at the helm. If your aim is to keep the transition short, don’t communicate that you will be available for the long haul after the sale to try and get the deal done. Adapting the transition period to how long an agency owner will be around is crucial to make sure the necessary ground is covered. If you are unsure about the ins and outs of the transition period, you can read our piece on that here.

The same goes for what you plan to do once you have walked away. If you plan to start a new agency, you will need to put a workable non-compete agreement in place first. It’s not unlikely that a new agency could be your next move, after all. You have the founder’s DNA inside you and have lived and breathed marketing in some form or other for years. Of course, it’s only tempting for an alternative next move to be early retirement and more time spent with your growing guitar collection, but if what you’re going to do is start a new agency, start on the right foot.

A further point to be clear on is the role of employees and where the client relationships sit. If owners are essential to maintaining these, this needs to be addressed. Buyers will typically interview senior employees to get the low-down anyway, so all the more reason to be upfront about relevant roles and relationships. An agency’s employees will be the ones staying on to deal with anything that was not handed over cleanly and openly. Just one more reason to keep all the stakeholders – and not just the one shareholder – top of mind when communicating your sale.

Managing Expectations

Like with any other transaction and business relationship, success lies in the alignment of the objective value of an asset and the perceived value. In other words, managing expectations is the key to making an agency sale a win-win. There are enough buyers for every type of agency so making the right match based on the facts of the business will be the key to making your sale a success for all involved.

by Molly McCartan

Six Ways An M&A Advisor Can Help You Sell Your Agency

Are you preparing to sell your digital marketing, PR, or Ad agency and considering hiring an M&A advisor? If you have never put a business on the market before, your head will likely be ringing with questions like the following:

How does the sales process work?
How do I value my agency?
How do I identify my ideal buyer?
How do I get the word out about the sale?
What will it cost me to sell my business?

Once these questions start falling in your mind like rain, you’ll hear a great crack of thunder as a final question strikes you like a bolt of lightning:

“Do I even need an M&A advisor? Why not just take this to market myself?”

Before you decide to put your agency up “For Sale by Owner,” you should be clear on the expertise – and dare we say value – an advisor brings to the table. After all the work you’ve done to build a business that’s worth selling, you owe it to yourself to make an informed decision.

That’s what this article will do: provide the information you need to decide for yourself. So let’s go for broke (pun gleefully intended) and dive into just what it is that M&A advisors do.

Valuation

If there’s one thing you should know about valuation, it’s never to take it at face value. There are many paths to determine the market value of your agency before you put it up for sale. But not all of them are worth their salt.

Let’s say you’re a service-based business, such as an agency. In that case, a valuation based on the value of your physical assets makes zero sense. Other methods that rely on fuzzy factors such as goodwill can also steer you down the garden path.

The truth is, an agency’s value may differ depending on context and the needs and preferences of buyer and seller.

So how do you climb out of the subjectivity hole and get a meaningful valuation? For starters, you can have a chat with an expert on business valuation – your friendly neighborhood M&A advisor.

He or she will likely combine a variety of valuation methods, each of which is weighted and prioritized according to your market, industry, business model, and financials. At Barney, for example, we consider 14 different factors, starting with your year-over-year earnings.

Sound like higher mathematics? It’s really more a cocktail of experience and good sense. However your advisor shakes the tumbler, the result will be far more accurate than a valuation based on a single method only.

Do not underestimate the power of accuracy. A listing price that reflects the true value of your business drastically increases your chance of getting a desirable offer from a buyer.

Confidentiality

Do you know the saying “discretion is the better part of valor?”

Actually, the saying is “valor is the better part of discretion.” But let’s leave our Shakespeare at the door and just point out what every M&A advisor knows: discretion is the key to a sweet deal.

If you are selling your business independently, maintaining confidentiality can be challenging. You will face many temptations, from spilling the beans to an employee whose career prospects are dear to you, to being loose-lipped with a vendor, who may leak word of the sale to a competitor.

Pitfalls and pratfalls like this can destroy a deal before it’s sealed.

An M&A advisor knows the value of discretion and the meaning of the word “mum.” He or she will keep your sale strictly confidential and ensure that information is released on a schedule rather than a lark.

Marketing

Selling your business on your own has its attraction. You can take all the credit if the sale goes well, and you get to keep all the money.

However, you might not have factored in the marketing costs and resources that a successful business sale requires.

From email campaigns to direct mailing, online advertising, social media marketing and word of mouth, the marketing muscle you will need to flex to receive your desired asking price can be massive. If you’re not careful, you’ll find yourself feeling the burn.

This is where a advisor can be a lifesaver. A seasoned M&A advisor has access to networks of buyers and databases beyond your wildest dreams.

Tapping into a advisor’s marketing capabilities can save you time, energy, and money. It can also help you reach your ideal buyer. That means a better deal and a better night’s sleep.

Negotiation

Is negotiating with lawyers your idea of fun? Then by all means, go it alone when selling your business.

However, if you prefer to outsource legal wrangling to those who know the rules and regulations and can handle smooth-talking attorneys, an M&A advisor is the way to go.

That’s right – we said attorneys. Often you’ll be dealing with more than one. An experienced advisor knows the ropes and won’t get rattled when the buyer’s and seller’s attorneys go head to head.

Another legal area in which an M&A advisor can make your life easier is lease negotiation. If a buyer needs a new lease for your business location and you botch the discussion with the landlord, the deal could fall apart.

In such cases, having an advisor handle the negotiation can give you a new lease on life (yes, we own that pun, too).

Financing

Speaking of puns, you can bank on an M&A advisor to have solid banking contacts. If your buyer needs financing to purchase your business, using the wrong lender can cost you months and imperil the sale.

Advisors are well versed in which lending sources to tap for which transaction and spend their careers building reliable contacts in the world of finance.

You may be great at financing a business. But this knowledge won’t always apply to your buyer’s situation. An advisor will know exactly who to call – and how to make, not break, the deal at hand.

Emotional Support

Last but not least, taking a business to market is an emotional roller coaster ride. There’s more at stake here than when you’re selling your tamagotchi collection (and that’s saying something).

When emotions get high – be it during legal haggling or at the closing table, an experienced M&A advisor can provide perspective, empathy, and support. Whatever issue you encounter, your advisors has been there before and can guide you through the haze.

That can’t just get you to a sale. It can keep you out of the looney bin.

That’s a Wrap!

Now that you know what an M&A advisor does, you should have a good grasp of the advantages of working with one. We’re happy to offer more reasons – or to help you sell your business. So don’t be a stranger, hear? Connect with us 🙂

by Amanda Dixon

Shifting Your Mindset For A Success Agency Acquisition

If you're trying to sell your agency, you’ve met them by now: those potential buyers who have dollar signs for eyes, calculators for hearts, and bank vaults for souls.

You’re not the judgmental type. You’re out to get the most value from an agency acquisition and you’ll give the highest bidder the benefit of the doubt. But this type of buyer prospect rubs you the wrong way.

by Clara Stedman

Selling A Marketing Agency For The Best Price

12 Tips For Selling A Marketing Agency For The Best Price

As you contemplate the decision to sell your digital marketing agency, it’s important to have a thorough understanding of what to expect. Digital marketing agencies can sell from anywhere between 1.5X – 12X EBITDA, depending on a multitude of factors. There are some obvious factors that determine how much your digital agency is worth, like the size and revenue structure (project vs. retainer based). Outside of those, there are steps you can (and should) take to get top dollar for your digital marketing agency. Keep reading for our step-by-step guide.

Selling A Marketing Agency

1 – Streamline & Document Wherever You Can

As you get ready to sell your digital agency, take some time to streamline your systems to reduce waste, organize the company’s technology assets (like a CRM) and optimize your organizational and personnel structure. If you don’t already have thorough documentation of your the ins and outs of your agency processes, this is the right time to get those in place. Sophisticated buyers willing to pay top dollar for your digital marketing agency will want to see a well-oiled machine that has proven systems and processes implemented company-wide.

2 – Make Your Biz Dev Process A Well-Oiled Machine

The biggest hurdle buyers often have when purchasing an agency is the business development process. What happens to the new business pipeline when the founder is gone? Even if the founder is willing to stay on board after the transaction, buyers still don’t like to see agencies without a clear business development system in place. For larger agencies, this should be a dedicated person or team that manages the inbound or outbound leads your team receives – ideally the founder isn’t involved in securing new business at all. For smaller agencies where this isn’t a possibility, the founder should have a reduced role in bringing on and securing new business. This is a big one!

3 – Get Better Contracts

Agencies with long-standing, foil proof contracts sell for a significantly higher multiple than those that are project based. If your agency can implement recurring revenue with retainer contracts – do it! If you can make those contracts for 12+ months without a 30 day clause, even better! This small change can be the difference of a lot of money at the closing table.

4 – Get Your Financials In Order

You need to have an accurate picture of your agency’s financials in order to sell your business for the best price. Seems obvious right? In order to convince a buyer your business is the right purchase for them, you need to know exactly what is coming in and out each month. Now is the time to take your mother-in-law off payroll and remove your business credit card from your Amazon account. Basic Profit and Loss Statements for 3 years and a current Balance Sheet should be enough to move you on to step 5.

5 – Find A Quality M&A Advisor To Sell Your Marketing Agency

This could be the difference between selling your digital agency for the best price and not. A quality advisor who understands your niche and industry (this is key) will be able to give you an accurate valuation, produce professionally designed marketing materials and most importantly, tap into their network of ready-to-go buyers. A great advisor will be worth their weight in gold at the end of this process and will absolutely help you sell your digital agency for the best price. If you need to connect with us, you can do that here.

6 – Figure Out What Your Agency Is Worth

Now that you have a clear understanding of where your company stands financially, it’s time to give it a valuation. An agency is only worth what the market is willing to pay for it, but there are some tried and true factors that go into a successful valuation. The agency’s revenue & profits, operational structure, years in business, supporting technology, growth opportunities and the current buyer pool are just a few of the factors that go into determining a valuation of a business. This is where it gets a bit tricky, and a good advisor is going to have unparalleled knowledge to price your business just right to sell. (We can help, schedule an intro call here). Remember, 80% of businesses listed for sale never get sold. Why? Poor valuation formulas and old-school marketing tactics. More about the latter below.

7 – Develop A Marketing Strategy To Sell Your Digital Marketing Agency

Once you know how much your digital agency is worth, it’s time to tell the world about the opportunity to purchase it. There are thousands of businesses that get listed for sale every day, making it imperative that your digital agency is positioned correctly in the marketplace. To get in-front of the right buyers, a unique, full-court-press marketing strategy must be implemented. Think email campaigns, press releases, direct contacts, click-funnel campaigns, paid media, search engine optimization, content marketing and most importantly, relationships. Unsurprising news flash – existing relationships with a pool of seasoned buyers is still the absolute best way to sell your digital agency for the best price.

If you’re using a business broker or M&A advisor, make sure to ask about their existing relationships with buyers in the marketing space. They should have solid, and long-standing relationships with seasoned entrepreneurs and buyers who are always on the look-out for their next opportunity. At Barney, over 80% of the digital agencies we sell get sold to an existing buyer in our database. We can’t stress this enough – these relationships are crucial!

8 – Develop Marketing Materials

While some businesses are purchased by first-time business owners, most are purchased by seasoned entrepreneurs & strategic buyers who are approached with dozens of businesses each week. Sending a potential buyer a traditional Executive Summary just doesn’t cut it anymore. Make sure you have a professionally designed Business Prospectus, which is essentially a presentation overview of your company in PDF format. A Prospectus is generally 15-30 pages long and is visually stunning, helping your digital marketing agency stand-out from the crowded marketplace of businesses for sale.

9 – Thoroughly Vet Interested Buyers

This is where things start to get interesting…and fun. You’ve put in all of the hard work in order to properly value your digital agency, a marketing strategy has been developed and all of the necessary marketing materials to get your digital agency sold for the best price have been designed and produced. If everything up to this point has been done correctly, you should start getting buyers interested in your digital agency almost immediately.

In order to sell your digital agency for the best price, it’s imperative that all potential buyers undergo an incredibly thorough vetting process. The screening and vetting process confirms the buyer is qualified to purchase and own your business and that they are the right fit for your particular industry and organizational structure. This often overlooked step is so, so important.

Here’s why:

Once a buyer submits a Letter Of Intent on your digital agency and you agree to the offer, you almost always enter an exclusive due-diligence period, in which you as the seller are generally not allowed to discuss the sale with other potential buyers. If the first buyer was not properly vetted and ends up not being the right fit for purchasing the business, you very easily could have missed your window of opportunity with another group of more qualified, better suited buyers.

10 – Get Creative With Negotiating & Terms

Once the vetting process is complete with a buyer and you feel like they would be a great fit as an owner of your digital agency, you’re in a wonderful position to start negotiating the Letter of Intent (LOI) submitted by the buyer. The LOI includes the price the buyer is willing to pay and the terms in which the amount will be paid.

Buyers almost never come to the table with all-cash deals or with offers that are 100% of the asking price. More than likely, your buyer will make an attempt to negotiate on asking price and offer terms that mitigate their risk, maybe suggesting a percentage of owner financing, an earn-out or a staggered purchase overtime.

In order to sell your digital marketing agency for the best price, at the best possible terms, it is imperative that you have a thorough understanding of why the asking price is what it is. How was the valuation determined and why is your digital agency worth what you’re asking? Understanding this will give you tremendous negotiating power with the buyer and will certainly help you sell your business for the best price.

In addition to negotiating the purchase price, you’ll need to negotiate advantageous terms. Who wants to sell their digital agency if you don’t get paid for years? It helps if you understand all of the unique ways to structure a business deal so you can make choices in structure that are advantageous to you, not the buyer. When in doubt, use a quality business broker or M&A advisor to help with this…it could be the difference between you selling your digital agency for the best price and you not.

11 – Set-Up A Training Schedule While In The Due-Diligence Phase:

Unlike when you sell real estate, buyers and sellers of businesses almost always have to work together for at least some predefined period of training and transition. Getting on the same page about the training agenda, timeline and expectations as early in the process will help you manage expectations and also show that you are a seller who is dedicated post-sale. If the buyer sees something he or she doesn’t like during the due-diligence, knowing that you are committed to a smooth transition and that you already have a plan in place could be the extra push they need to get across the finish line at top-dollar.

12 – Use A Business Attorney For A Final Review Of Documents

There are a lot, and we mean a lot, of documents that go into the sale of a digital agency. In order to sell your business for the best price, and protect your interests after the sale is complete, it is imperative to utilize a business attorney to review all legal paperwork.

In Conclusion…

If you decide to start and eventually sell an agency, there are things you can (and should) do to help prepare your agency for an exit. We can act as a resource along the way, don’t hesitate to reach out with questions! Connect with us when you’re ready!

by Molly McCartan

Acquisition Goals: It Pays To Know The Buyer You Want

Entrepreneurs often spend years building their agency and, when it comes time to sell, they naturally want to sell for the best price, whether to retire or simply to cash out and move onto something new. However, sellers often focus solely on the financial components of an offer and overlook some of the most important factors in determining if a buyer fully aligns with their acquisition goals. When selling your agency it pays to know the buyer you want!

Defining Your Acquisition Goals: Know Your Buyers

Buyers fall into four categories — strategic, financial, internal and solo entrepreneurs — and each type of buyer approaches buying a business like yours with a totally different acquisition goal in mind.

1 – Strategic Buyers

Strategic buyers often want a company that fits with their own, perhaps because of complementary products or to advance their geographic or vertical expansion. Often times these buyers are competing companies who place a premium on things like market share and brand recognition. Strategic buyers generally don’t value your current management team or employee base as much, since their team will most likely assume day-to-day operations. When evaluating agencies to purchase, strategic buyers like to see growing profits and the potential for even more in the future.

2 – Financial Buyers

Financial buyers are often times private-equity investors who want to grow earnings or merge companies to capture savings. These buyers almost always have the goal of selling the agency for a higher price in three to five years and aggressively pursue their agendas to maximize their investment return as quickly as possible. Financial buyers want free cash flow and growing revenue and are often times less concerned about profits since they view themselves as experts in squeezing the maximum from operations. Unlike strategic buyers who don’t place any value on your current management team, financial buyers favor a strong team that can execute on their vision. If the seller wants to cash out but would like to remain at the company for a few more years, a financial buyer would make the most sense.

3 – Internal Buyers

An internal buyer, often management teams or second-generation family members, are people who work at the company and often times share the owner’s vision and want to build upon it. These buyers are unlikely to pay the highest price, but they will almost always commit to preserving the culture or core ethos of the company. Internal buyers generally want to see strong financials and a solid balance sheet, as well as a good corporate culture and a diverse offering of products and services.

4 – Solo Entrepreneur

An entrepreneur buyer is generally a single person who is purchasing their first business or is looking to add a business to their modest investment portfolio. In most cases, solo entrepreneurs plan on being involved heavily in the day-to-day operations of the business and will most likely not plan on “flipping” the business in a few years. Entrepreneurs vary greatly in what they look for in a business and often require the most hand-holding during the business transition. For some sellers, the heavy involvement during the transition period can be a deal-breaker, but on the other hand, solo-entrepreneurs often pay top dollar for businesses because they are more emotional and personal purchasers than the other buyer types.

Identifying Your Goals As The Seller

Each seller has different motivations when exiting, ranging from their transition commitment after the sale to maximizing price or maintaining the company legacy – and this is where the matchmaking is critical. Remember, when selling your business it pays to know the buyer you want, and this starts with identifying your own acquisition goals.

A seller who has a primary goal of finding someone who will operate the company in the same manner and protect the current employees may favor a deal with an internal buyer or the right solo entrepreneur. A seller that’s retiring and wants the highest sale price should position the business to be most appealing to strategic, financial or certain solo entrepreneur buyers. When it comes time to sell your agency, knowing the right buyer type ahead of time can make the sales process quicker and more streamlined.

Once a seller has defined his or her acquisition goals, it becomes easier to make an honest assessment of the strengths and weaknesses of the agency through the lens of what that buyer-type values. After all is said and done, it’s important that no matter the buyer type, the seller feels confident that the buyer will be able to maintain or grow the company once they are no longer involved. Using an M&A advisor who understands the type of buyers that suit your agency and personal needs best will ensure you get what you’re looking for in an exit and can also save a significant amount of time in weeding out buyers that won’t fit.

by Amanda Dixon

17 Tips For Selling a PR Agency For Top Dollars

Tips To Sell A PR Agency For Top Dollars

Sell A PR Agency For The Best Price

You founded your PR agency, took the time to grow it, and now are reaping its benefits, but the time will eventually come for you to sell it. Maybe you’re at the top and are ready to strike while the iron is hot, or maybe you’re ready to join forces with a larger agency. Regardless, there are a few things you should do while you’re embarking upon the exit process. These tips for selling a PR agency will help you get top dollar for your firm.

1 – Streamline, Organize & Document Everything

Before selling a PR agency, take some time to streamline your systems to reduce waste, organize the company’s technology assets (like a CRM) and optimize your organizational and personnel structure. Think about your firm as if you were out of the picture…would it survive? If not, what can you do to make sure the walls don’t crumble if you’re gone? If you don’t already have thorough documentation of the ins and outs of your firm’s processes for key areas of the business, this is the right time to get those in place. Sophisticated buyers willing to pay top dollar for your PR firm will want to see a well-oiled machine that has proven systems and processes implemented company-wide.

2 – Make Your Biz Dev Process A Well-Oiled Machine

Business development is a really big deal to buyers! Given that most PR firms don’t have a lot (or any) collateral assets, a lot of the “secret sauce” lies in the way the firm gets new business. Do whatever you can to systemize this process, ideally in a way that doesn’t center around you. Even if you’re looking for a strategic buyer that will keep you on board for several years post transaction, buyer still want to see a clear business development process that operates without the founder leading the charge.