selling a marketing agency

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!


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!

Acquisition Goals: It Pays To Know The Buyer You Want
When It Comes To Selling Your Agency – You Need Well-Defined Goals

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.


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.

3 – Get Better Contracts

PR firms with long-standing, foil proof contracts sell for a significantly higher multiple than those that are project based. Often times, PR firms or agencies specializing in corporate communications have retainers in place with their clients (good!) but they have a simple 30-day out clause. Buyers like to see strong contracts that can be transferred over to the buying entity at close.

4 – Get Your Financials In Order

You need to have an accurate picture of your financials in order to sell your PR firm for the best price. Seems obvious right? In order to convince a buyer your firm 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. For larger agencies, try to put non-revenue producing line-items (like labor for R&D) as a standalone line item on your P&L so buyers can easily add these back into their financial calculations.

5 – Find A Quality M&A Advisor To Sell Your PR Firm

Many buyers of PR firms are going to be large marketing agencies looking to acquire a strategic bolt-on that specializes in corporate communications. These buyers will understand the cross-sell opportunities available to them on day 1 and will appreciate the holistic approach to client services that PR firms generally undertake. Using an advisor who understands this dynamic is crucial. This could be the difference between selling your PR Firm 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 PR Firm Is Worth

Now that you have a clear understanding of where your company stands financially, it’s time to give it a valuation. A PR firm 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 firm’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 PR firm just right to sell. (We can help, schedule an intro call here).

7 – Build Relationships With Seasoned Buyers (Or Hire Someone Who Already Has Them)

Unsurprising news flash – existing relationships with a pool of seasoned buyers is still the absolute best way to sell your PR firm 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 and agency space. They should have solid, and long-standing relationships with seasoned entrepreneurs and strategic buyers who are always on the lookout for their next opportunity. At Barney, over 80% of the Public Relations firms we sell get sold to an existing buyer in our database. We can’t stress this enough – these relationships are crucial!

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!