What Do I Need to Do When Someone Wants to Buy My Digital Agency?
Are you starting to look into the opportunities available if you were to sell your agency? Are you unsure of how you can value your agency correctly and make it appealing to buyers?
It can be super exciting when someone is interested in acquiring your agency… right up until the time that it gets super overwhelming. Here are the steps you need to take to make sure that when you sell your agency, it goes as smoothly as possible while also benefiting you and your employees the most.
How to Sell Your Agency
#1 Know what your agency is worth and the amount you need to have to walk away.
These deals are done in a two-tier structure: cash amount and earn out. Come up with your cash amount figure, present it to the buyer and make sure you’re happy with the amount. Most earn outs are structured in a way that make them unachievable, so don’t get your heart set on earning it.
#2 Resist the urge to celebrate.
Celebrations and telling people too soon could seriously bite you in the ass. If someone is inquiring, they have interest but there is no deal in place. Keep it “business as usual” and try not to mentally spend all that money you think you’re going to get in the buyout.
#3 Be helpful without disclosing too much before you get the Letter of Intent.
You’ll feel the need to provide a ton of information to make sure the deal pans out. Stop yourself from tipping your hand too much. This buyer is probably a competitor, so why would you tell them all your secrets? They will want to know things like: margins, revenue, growth, client list, employees, and all that is alright to share. But don’t start handing over documents, processes, or anything that is not necessary for them to get the full scope of the potential transaction. And, anything they ask you is fair game for you to ask them in return. Ask relevant questions to make sure they have the capability to buy.
#4 The Letter of Intent
LOIs resemble written contracts, but are usually not binding on what the purchaser evaluates your agency’s worth. It is always good to know how to evaluate the worth of your agency, check out my Agency Valuation Chart as a starting point to see what your agency might be worth. The chart shows you the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amoritization).
#5 Due diligence phase.
Keep things quiet and keep moving your business forward. Instead of daydreaming of ways to spend your new income, act like it’s not going to happen. Reality check: it may not happen. These things collapse all the time and if you check out now, your business bottoms out and you’re left with no deal and no agency. In the meantime, learn what you can about your buyer. What their intentions or reasons for the acquisition? Do they want your clients? Do they need you for your specialization? Are they trying to expand in your geographical location? Learn what you can to help make this is smooth transition for your employees IF (not when) the time comes.
Are you ready to kick it into gear and grow your agency into something worth buying?
You might want to check out my Agency Mastermind group. This is a group of like-minded individuals that meets every other week , so it’s not a huge time commitment but the benefits are immeasurable. You can read more details here and if you’re interested there is a brief application process. You’ll fill out a quick form and I’ll let you know if the group is a good fit for you.
Improve Your Agency and Become a Better Agency Owner!
Through my years of experience, It’s allowed me to provide advice on many topics from the struggles you may face with failing economies and recessions to how accepting a speaking opportunity can create business and the four phases of growth you may experience within your agency.
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