Can You Use Mergers and Acquisitions to Scale Your Digital Agency?
Considering a merger or acquisition to scale your agency? Wondering what’s involved in selling, but overwhelmed at the thought of it all? Relax! The processes can be stressful, but it’s totally manageable and can also be a great growth strategy. Whether you want to stay in control and grow your agency with an acquisition, or you want to exit your business with a massive payday, here’s everything you need to know about agency mergers and acquisitions.
In this episode, we’ll cover:
- 3 things agency acquirers are looking for.
- The best way to cure agency growing pains.
- Can you really grow through mergers and acquisitions?
Today, I talked with Jose Lozano CEO of 9thWonder — a full-service digital marketing agency with offices around the globe. Jose didn’t start off with a massive agency, and he didn’t grow one… he bought one! After selling his company to a massive organization, he led a group to acquire an agency to scale up. Jose shares why and how to scale your business by acquiring another agency.
3 Things Agency Acquirers Are Looking For
Selling your agency is an important decision. Are you really ready to sell? What will you do after you sell? Will you merge agencies and stay on, or get acquired and move on? The answers to all of these questions matter. But, before you can even start thinking about them, you have to ask the big question — is your agency sellable?
When CMOs and big organizations look at agencies, they aren’t just looking at profitability. They’re looking for opportunities. Jose has done internal M&A polling, and I’ve talked to thousands of agency owners on this subject. Here are 3 things that make your agency sellable.
- Having Processes: You can be crazy-successful but still look like a bad investment. Having success is one thing — having a repeatable formula for success is a whole different ballgame. When you have the right processes in place it lets investors know you’re successful and that you’ve broken your success down into a repeatable formula.
- Being Independent: If you created your agency with the sole purpose of selling it, you’re at a disadvantage. It’s like when people buy a house just to flip it, they treat it differently because it’s not their home and never will be. The same thing happens with agencies. Being an independent owner who has hustled and bled for their agency is huge. It lets people know you’re personally invested in your business.
- Niching Out: You have to have an unfair advantage. Why should an acquirer buy you? There are plenty of agencies out there but, if you do something better than everyone else — you’re worth top dollar. Dominating a specific niche not only makes your agency more valuable to investors, but it is one of the best ways to be viewed as an industry leader.
The Best Way to Cure Agency Growing Pains
Your agency’s size is not relative when it comes to stress. I’ve met agency owners with 3 part-time team members that were as stressed as owners with 30.
It’s all about how you handle key areas of your business. What’s causing the stress? Is it ops? Or are you having trouble handling team members? Whatever it is you have to pinpoint it and either hire it out or partner up with someone who gets it. Deciding to grow is a conscious choice. And it can be impossible to make that choice when you’re busy managing your stress level.
Chances are, you know what’s causing your stress. Maybe you’re overwhelmed with finances and KPI’s, or maybe you dragging your feet on hiring or firing. That’s ok! If you feel like you’re not cut out for the role of CEO the solution might be getting acquired or merging with an agency.
Don’t be afraid to give away some of your equity to reduce your stress. Which would you rather have? Full ownership of a stressful, chaotic agency, or 80% ownership of a well-managed one?
Can You Really Grow Through Mergers and Acquisitions?
Yes, you really can! Giving away equity can put you on the growth fast track. And acquiring another agency can also be one of the smartest moves you ever make if you do it right. I know what you’re thinking! How do you know what your agency (or another agency) is truly worth? You can check out this video on agency valuation. Bottom line, the answer really depends: How profitable are they? What kind of niche are they in? What’s their profit margin?
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