WHAT REASONS DID YOU HAVE FOR SELLING YOUR AGENCY? #ASKSWENK EP 22
In this episode, I cover:
- The big reason why I got into the agency business.
- 3 reasons why I got out of the agency business.
- 2 tips to consider if/when you decide to sell your agency.
One of my subscribers, Jonathan, wrote in asking why I chose to sell my digital agency after 12 years running it. Jonathan explained that he is a brand owner running a business with physical products. He says his current business has high overhead and his cash is tied up in inventory. He’d like to start moonlighting as a consultant because he thinks the agency side looks alot more glamorous with higher margins and healthy cash flow. He asks:
“What are the drawbacks of running an agency and what were your reasons for selling?”
Like anything else, there are pros and cons to agency ownership. We went through all the typical stages in the lifecycle of any service business… Ultimately, I had 3 reasons for selling when I did. However, every situation is different and your experiences will differ from mine.
1- I reached my destination.
When I started my agency in 1999 I entered the business with the goal of selling it within a couple years. It was supposed to be an easy way to earn good money during the internet boom. Turns out I loved being an entrepreneur…. So, fast forward 12 years. We had our fair share of ups and downs. We hit some tough terrain along the way with cash flow issues. We even looked at closing the doors, but instead brought it back to a healthy and thriving agency. We had accomplished a lot by working with some really big brands like Lotus Cars, Hitachi, LegalZoom. We’d done everything I had set out to do. We had surpassed the 7-figure mark and that was right where I wanted to be. Ultimately, I had built something that someone else wanted and when the offer came in, I felt like I had gotten where I was going.
2 – I had partner problems.
It happens. My partner is a great guy and we worked well together for many years. We got to a point, though, where the business outgrew the partnership. It was just time to move on. I stayed with the company that bought my agency so that I could ease the transition for my team and be available for key client relationships. Don’t get me wrong, though. Even though the sale eased the partner problems, it created a new set of problems. It’s hard when you’re used to being the captain of the ship, and then suddenly… you’re not.
3- It felt right.
I hate to use a cliche, but it really was “the right place and the right time.” When we were approached by a buyer, it wasn’t something we had been actively pursuing but we entertained the idea because it just felt right. Reasons #1 and #2 already existed and an acquisition seemed like the solution. It felt right to close that chapter and start a new one.
Would I do it all over again?
Hell, yes. To answer Jonathan’s original question — No, agency ownership is not just high margins and healthy cash flow. There are lots of ups and downs. It’s definitely different than owning a business and carrying inventory and it has it’s own unique pros and cons.
However, if you love what you’re doing, you’re putting out great work and love who you’re working with, then keep doing it! When you get to the point of wanting or need out, you’ll know it. My 12 years as an agency owner led me to this incredible opportunity to provide guidance and support for other agency owners. It was my stepping stone to another great job.
2 tips to keep in mind if/when you sell:
1- Develop your new role. Know where you’ll fit in after the agency is acquired (if you stay at all). The transition away from ownership is a hard one. You aren’t the decision maker or main stakeholder anymore but your team may need your presence. After I finally left the newly merged agency it took me some time to figure out what to do next. Thankfully, other agency owners started reaching out for advice which led me to a new job that I LOVE.
2- Be happy with the cash payout amount. Know the value of your business and have a cash amount in mind. Don’t tie the deal to an earn out because, in my experience earn outs are designed to fail. You have no control of whether you get to collect on it or not, so don’t count on walking away with any of it. And if you do, consider it a bonus.
There are tons of ups and downs as an agency owner. Whether you are faced with managing them alone or with a partner, remember you can always #AskSwenk. And if you want detailed information on all the systems and processes I used for to build my agency into something worth buying, check out the Agency Playbook by clicking here.