How To Identify The Right Buyer For Your Agency Acquisition
Are you setting up the processes you’ll need to sell your agency one day? How would you go about weeding out the red flags to identify the right buyer? Today’s guest started his agency at 25 and didn’t think he’d ever want to sell. The pandemic made him reconsider, but he needed to find the right buyer. Someone that would benefit his clients, his team, and allow him to still be a part of his agency’s future.
Aaron Levenstadt was working at Google when he started offering SEO consultancy services to referred clients. When some of them asked for ongoing support, he started Pedestal Search. His agency focuses on helping businesses drive more productive traffic from search engines to their websites or stores. Now, years later, he found the right buyer and continues to be a part of his agency’s growth.
In this episode, we’ll discuss:
- How he decided to sell.
- Red flags in possible buyers.
- How to identify the right buyer for your agency.
Sponsors and Resources
E2M Solutions: Today’s episode of the Smart Agency Masterclass is sponsored by E2M Solutions, a web design and development agency that has provided white label services for the past 10 years to agencies all over the world. Check out e2msolutions.com/smartagency and get 10% off for the first three months of service.
A Lesson on Accelerating Agency Growth Early-On
Aaron started his agency charging $6K a month for SEO and analytics services, which was great for a new business. He believed rushing to scale too fast could affect his ability to provide a good service. It took him 6-7 years to get over the $1 million mark.
There were many lessons involved over the years of that agency growth process. One big lesson was learning how to explain what they do as an agency. Part of niching and finding your audience involves learning to clearly explain what you can and cannot do for clients. Once they nailed that part and had the processes to support it, growth accelerated. He also chose this time to start raising prices now that the agency had found an audience that resonated with its message.
Getting Serious After Hitting The $1 Million Dollar Mark
Getting to the $1 Million mark was the moment when Aaron actually started to get more serious about the agency’s future. He and his team laid out a blueprint of how the company should run and got to work. It was a good moment for him to start replacing himself in several tasks and move to more of a strategy-based role.
Basically, they developed an organizational chart where they could look at ratios of account strategists to see how many clients each could handle comfortably. The result was 4 to 9 clients per strategist depending on the size of the account. They then added an execution and delivery layer to the chart and started filling those roles, which freed Aaron to focus on more strategic and directional level thinking for the agency.
Two Major Red Flags in Vetting Potential Buyers for Your Agency
Selling the agency was not the goal from the start. Aaron saw himself working in the agency until the end of his career and saw no need to sell it. This is where having guidance like the Digital Agency Elite Mastermind is really helpful. Aaron didn’t really consider acquisition seriously until some of his mentors started to ask questions about his future and legacy. Questions like “where do you see the agency going in the future?”, and “are you planning to grow your staff of 25 employees, or to 50 employees?” got him thinking
Around that time, he started to get emails from companies interested in buying his agency. It was the start of the pandemic and he got regular inquiries. However, he still wasn’t sure.
In dealing with potential buyers, Aaron found a few red flags he shared:
- Why are they interested in your agency in specific? If they cannot articulate a reason then they are just shopping around and are not serious.
- What is their reason for acquiring an agency? Are they buying to grow in a niche? Do they want to expand in a specific service area? Are they buying you for your team and processes? If they are not anchored to a why then aren’t legitimate.
If you’re going down the path of deciding to sell, you need to understand where a buyer is coming from and where they are going. In Aaron’s experience, buyers back then were only thinking about the low-interest rates and didn’t have a real plan. A serious acquirer needs a full plan to cover different key factors like the culture fit which is so important for the possible success of a merger.
Identify the Right Buyer With a Commitment to Your Agency Vision
Aaron finally found the structure and vision he was looking for when he started talking to a buyer with a very clear vision from the beginning and showed a sort of confidence in what they could do together. Of course, there were difficult points where Aaron was not sure if he wanted to go through with the acquisition. He had built this agency working by himself with his laptop and meetings clients at a Starbucks or a restaurant. It was his baby.
However, throughout the entire process, this buyer proved to be the sort of person that does what they say they’re going to do. A reliable buyer provides a sense of relief because an acquisition is commonly a time-consuming and stressful undertaking. Aaron was able to visualize himself working with the new, merged company and that the acquisition would benefit his clients and his team.
Additionally, this buyer’s ability to work with his agency leaders really helped drive value for his clients and provided valuable opportunities for his team to learn and grow.
Things He Would Change That Could Have Boosted His Growth
Things turned out pretty good for his agency, but if Aaron could go back to when he was starting out in the industry he would be much more intentional about defining his ideal client sooner. His advice is to focus on finding your niche and audience early on. This empowers you and your team to say no to everything else and has a big impact on your growth.
He would also hire an operations manager a lot sooner. As an agency owner, it’s a commitment to start hiring for key roles, but having someone that can be responsible for running operations is incredibly helpful. Thinking back, Aaron now sees with a team of about 10, is the ideal time to hire someone to ensure operations run smoothly.
Agency owners are mostly visionaries and are not particularly good with management. You need the “how” people that take care of the logistics to implement your ideas and get you where you need to be. This is the first step in setting up the systems to eventually sell one day.
If the owner is doing everything, the valuation and the opportunities to sell will go down rapidly. An operations manager will help you both have more free time and focus on the vision for your agency.
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