How to Improve Digital Agency Value and Prepare Agency for Acquisition
No one wants to work forever. We’ve all got those “someday” wish lists, right?
We imagine retiring to a beachfront condo in Florida or a mountain home in Colorado 🙂 We dream about the vacations we’ll take and the sights we’ll see, plus all that extra time we’ll have to learn to sail, or cook, or golf. There are all those projects we’ll finally get to – gardening, home brewing craft beer, and maybe even downloading all those digital photos trapped on memory cards.
But, if you’re an agency owner or entrepreneur sometimes those days seem so far out of reach. Consecutive 80 hour work weeks make it feel more like “someday” means “no day”. I’m here to tell you not to get discouraged. It can happen and it will happen… There’s one simple thing you can do to make your retirement bucket list a reality, sooner than later and easier than you might think: build a business worth buying, even though you’re not ready to sell yet.
How to Build An Agency Worth Buying
Whether selling is something you are actively pursuing or something that’s in the more distant future (or anything in between), the key to a successful and profitable sale is understanding a buyer’s reason for buying. Then you can build something worth buying.
Do you know your agency’s current value? Do you know what you should be doing to make your digital agency an attractive purchase to a potential buyer? That’s the real to the key to making a lucrative sale (if/when you’re ready to sell). It’s not all based on profitability, although that’s certainly an important factor as well. But the real way to make sure potential buyers find you are to understand the reasons buyers look to buy.
Sure, everyone’s reasons for selling are different, but a buyer’s reasons for buying can usually be put into one of three boxes. Understanding what those boxes are, before you’re actually looking to sell, will set you up for a profitable business now and an attractive sale in the future.
3 Reasons Buyers Might Buy Your Digital Agency
1. To grow and scale more rapidly.
If you’ve got a totally buttoned up process for this or that, maybe both – someone is going to want it. If you’ve got rock star talent on your team – someone is bound to want it. Point is, a prospective buyer will be attracted to your processes or your talent and realize that buying your agency will help them scale and grow much quicker than if they develop the systems or acquire the talent organically.
What you can do now:
Even though you may not be ready to sell your agency right now, now is the time to prepare it to sell. Honing processes and building a talented team takes years, so focus on it now. Develop processes that everyone’s talking about. Maybe it’s your delivery system or your scoping process… Pick one or a couple and be killer at it. Partner agencies, competitor agencies, clients and industry colleagues will talk. (My digital agency was acquired by another, larger agency who wanted to grow in the area which we excelled.)
Need help with systems and processes? It all starts with a solid business plan (watch the video below).
2. To have a presence in your geographic location.
Sometimes a great agency is looking to expand geographically. Rather than starting at square one and opening a satellite office in a new location, a buyer will look to acquire an agency that’s already established in their desired location. Sounds like dumb luck or a right-place-at-the-right-time kind of situation doesn’t it. But you can stack the deck the in your favor.
What you can do now:
Don’t wait until you’re ready to sell your agency to toot your own horn. Make a name for yourself right now. I owned my digital agency for 12 years and over the course of that time we found ourselves on a lot of “top” and “best of” lists — Atlanta’s Best Place to Work, Top 25 Small Businesses, Top 10 Most Dependable Web Design Firms in the Southeast, Atlanta’s Top Marketing Firm… you get the picture. I don’t tell you this to impress you but to impress upon you that lists mean something to other people.
Be an awesome agency and make sure everyone knows about it. Local titles, awards, and honors will put on the map. It’s not the ADDY’s that get you recognition, although they’re nice, too 🙂 Getting your name on these lists is like marks your territory. It makes you appealing to clients, talents and eventual prospective buyers. Why would a buyer move into your location and compete when they could approach you with an acquisition offer and be you?
3. To obtain a bigger piece of the pie.
It’s like the old adage – it’s not what you know, but who you know. And just as badly as you want to work with big clients, so do other agencies. This type of buyer is either motivated by your client list or they’re after more of the dollars those clients are spending (such as a traditional agency who is looking to acquire a digital agency). There are two ways you can grow your business while also attracting this type of buyer.
What you can do now:
First, specialize. Find your niche and appeal to those specific clients. Don’t be afraid of it, embrace it. All too often, I’ll be coaching an agency owner who tells me they don’t want to specialize because they don’t want to turn off or turn away potential clients. Niching does not mean turning away business. It means focusing your time, your talent and your resources toward one type of client. Maybe you’re best at medical marketing or maybe it’s automotive, banking and finance, law firms… your pick! As you establish yourself as an authority in marketing to clients in that industry you are also establishing yourself in the agency community as an authority in that industry. When a competitor or an agency who offers complimentary services is looking to grow, they’ll look at you as a way of doing so.
When Is the Right Time to Sell Your Agency?
Honestly, there’s no easy answer. The timing has to be right for you, and all I can tell you is that you’ll know when you know. (Sorry!)
Hindsight is always 20/20. Sometimes I wonder if I sold my agency too soon, despite that fact that it sold for 8-figures.
When my digital agency sold, it was to a strategic partner agency who we’d worked with on several other projects. They were a bigger agency with complementary services and at first, we were looking at ways to bring each other more business. After a closer look at what we were doing – our processes, our team or talent, and our clients – they brought an acquisition offer to the table. Instead of working together, they just wanted to acquire us and become one. That was the right decision at the time for my situation, but I can’t advise on what’s right for you and when. I do know that an acquisition is always better than making bad decisions, allowing profitability to suffer, and closing up shop.
Bottom line — if your agency can be number one at one offering, one core service and use it as a foundation to be a leader, you will grow and scale your business. You will get noticed. You’ll be a leader in your industry. You will more profitable. And, you will gain the attention of potential buyers who, when the time is right, will make you an acquisition offer.
Build your business to sell, but treat it like you never will.
If you have more questions about the sale process, be sure to check out my blog posts on that topic as well.