VITAL STRATEGIES YOU MUST CONSIDER BEFORE SELLING YOUR DIGITAL AGENCY.

Transcription

1 VITAL STRATEGIES YOU MUST CONSIDER BEFORE SELLING YOUR DIGITAL AGENCY. PLUS KEY TACTICS TO HELP MAXIMIZE YOUR EARN OUT. made with

2 Contents 1. Author 2. Article Summary 3. Is now the right time to sell your digital agency? 4. The challenges you'll face trying to sell the agency 5. Take these steps before you attempt a sale 6. To capitalize tomorrow, begin specializing today. 7. Ways to specialize the rm 8. How to build agency value and attract buyers 9. The importance of an agency valuation 10. The ideal candidate for a premium sale price 11. Exit planning: a vital process to ensure success 12. Prosper Group's M&A team 13. About the Prosper Group

3 Author DOUG BAXTER DIGITAL PRACTICE LEADER PROSPER GROUP Doug is a digital industry leader. He has built and sold several successful agencies both traditional and digital in Europe and in the US. He is a former Managing Partner of M&C Saatchi's digital agency SHARE where he led global digital strategy. Doug s specialty: putting digital at the heart of an agency s DNA. He also thrives at helping an agency owner maximize his or her investment. He would enjoy helping your agency evolve, thrive and sell for top dollar, too.

4 Article Summary Grooming your digital agency for a prime sale price takes skill. Prosper Group's digital practice leader Doug Baxter has sold several successful agencies. So, he can guide you through all the essential steps of this process. Carving your niche and leveraging your specialty is key. Done right, Doug and the Prosper Group can ensure that you have all of the options to get the maximum reward from your life s work. DOUG BAXTER (Los Angeles) Partner, Prosper Group DAVID BOSSES (New York City) Partner, Prosper Group ALEX HALBUR (Los Angeles) Managing Partner, Prosper Group LET'S CONNECT NOW

5 Is now the right time to sell your digital agency? You ve worked hard to build your digital agency and run a successful business. Your success took sacri ce, conviction and a relentless belief in yourself. But, eventually we all move on. Maybe you want to pursue another venture. Perhaps you ve built a great reputation and you want to capitalize on it. Or, maybe you re just burnt out from jumping through aming hoops each day for clients. Maybe you simply want to enjoy life for a change. Whatever the reason, you need to plan early to maximize your earn out. There are several key phases of the sale process that must be executed in harmony. Otherwise you risk giving away your rm for less than it s worth. All of the partners here at Prosper Group have owned, managed, bought and/or sold several agencies. So, we d like to share our experience with you so you can get the most out of your business.

6 The challenges you'll face trying to sell the agency 1. Much work is project based, and clients change often. This may be regarded as a risk to buyers. 2. The agency may lack a niche (such as a unique positioning, technical skill, big-name talent or ideal location) 3. Your client relationships are personally tied to you / the ownership. But, will those bonds transfer to a buyer? 4. Like many agencies, you may not have a strong balance sheet or you may have inconsistent P&L performance. 5. Sta turnover is rampant. Yet, talent is the lifeblood of any agency. These challenges are common, so you must be realistic. Not every agency owner will cash out and walk away with millions. There are many buyer objections, and the process can take a year or more. So addressing potential concerns now will help you position your agency for a viable sale. For instance, develop longstanding client relationships with monthly retainers that include recurring revenue. That s attractive to buyers. Also, have you developed unique technologies or Intellectual property that a potential buyer could leverage for other clients? Lastly, cultivate your talent pool with new training. Then work on improving the agency culture. Happy employees typically stay on the job longer. If you re not thwarted by these headwinds, and want to pursue an eventual sale, then read on. And learn how you can successfully sell your digital agency.

7 Take these steps before you attempt a sale There are many factors to consider before selling. First you need to show prospective buyers you re o ering a viable business with growth potential that can succeed after your exit. Step back for a minute and look at your agency objectively. Ask yourself: Would I want to buy this agency? If so, you need to prepare it for the marketplace by taking several key steps. If not, then you must take dramatic steps to swiftly rectify any troubling red ags. KEY CONSIDERATIONS BEFORE YOU SELL: Resolve why you want to sell and if you re ready to leave. Don t make an impulsive decision based on emotion or circumstances. Consider what buyers want. Digital agencies are hot but do you have a specialty within that space to help you stand out? Do you have a solid positioning? Beyond logo / tagline, how strong is your agency culture, sta satisfaction, public perception and client experience? Evaluate your business proposition. What makes you unique and better than competitors? Make sure it is clear, concise, and convincing. Review your nancials to ensure your balance sheet is healthy and the P&L is solid. This is one of the rst things prospective buyers want to see. Does any one client deliver more than 35% of your net revenue? If so, that s a red ag because losing that client would create havoc and require signi cant time and great e ort to recover. (Plus, huge clients often demand more since they know you need them.) Is your pricing model competitive? Under charging and over delivering leads to insolvency. Scope creep can turn a pro table job into a loss leader. Have you developed any proprietary technologies, methodologies or processes that can convey your unique o ering in the marketplace?

8 To capitalize tomorrow, begin specializing today. Over the past five years, the top entities acquiring agencies were WPP and Publicis. But, the buying spree has slowed, and there s no guarantee of a big payday. Plus, it is no longer sufficient to say, we re a digital agency. Every agency provides digital services in some form or another. So, you must have a specialty if you want to be distinctive. What can your firm specialize in so that you stand out from the rest? Ribot specializes in building retail mobile apps. Spectrum Science specializes in science & health PR. Organik SEO specializes in search engine marketing.

9 Ways to specialize the firm THOSE THREE FIRMS RIBOT, SPECTRUM AND ORGANIK THEY ALL HAVE DEEP EXPERTISE IN ONE, SOUGHT-AFTER VERTICAL INDUSTRY. This quality makes them cutting-edge experts in their elds with de ned customer bases. Survey the digital landscape to unearth your opportunity. For instance, mobile ad revenue is up 22% over 2016 gures. So, if you can forge an expertise in digital response and conversion rates, then you re ahead of the curve. Mobile app development is huge and becoming increasingly more vital because now more than 50% of all web activity occurs on mobile devices. So, if you focus in award-winning apps for luxury brands, your agency should carve a niche, and it may eventually sell for a premium price. Don t have a specialty? Consider pursuing one! Then, you can truly show prospective buyers your rm is leading the way not just trying to keep up.

10 How to build agency value and attract buyers Most buyers look for an agency that can complement their capabilities. Traditional ad agencies that excel at print and broadcast are seeing ad budgets funneled into digitally led organizations. And they re missing out. So they urgently need robust digital capabilities to hold and raise revenue. But, why should a suitor buy your agency over another? Marketing 101 tells us: present a product that buyers want or need. So, is your agency uniquely positioned? Do you have a strong reputation? How about that niche? Look at hot agencies and media rms that have been acquired recently. They have a technical specialty or a stellar reputation. A viable new business strategy Widely-regarded creative work with noteworthy accomplishments Expertise in a digital service that shows solid growth potential A blue-chip roster of clients that are spending signi cant money A team that s dedicated to the rm's vision (easier said than done) Access to regional expertise (such as an o ce in Asia or India where mobile growth is huge)

11 The importance of an agency valuation What s your agency worth? What would you say if an unsolicited buyer calls? Do you know if the company s value is enough to fund your lifestyle after the sale? As you consider a sale, there are many factors to consider. You only get one chance to sell so let s do it right. It all starts with a formal agency valuation, which considers a dozen or more factors in your business model such as the qualitative factors we ve discussed that build value. On the nancial, or quantitative side, agencies are generally valued by cash ow. Speci cally, value is often assessed at a multiple of EBITDA. Yet, digital rms often command signi cantly higher multiples especially if they posses a specialty. On the talent, or qualitative side, agencies are valued by many factors including the capabilities of your senior team, your sta 's digital capabilities, employee longevity, unique skill sets, client roster and more. Prosper Group can groom your agency over the next one to three years to increase its value and raise your readiness for a transaction. Soon, your company will be perfectly positioned to maximize its sale price. And, you ll be uniquely positioned to live a rewarding lifestyle.

12 The ideal candidate for a premium sale price A highly desirable and uniquely positioned digital agency can yield a premium sale price. Such an agency typically has these key attributes: a bold strategic vision a solid P&L statement longstanding client relationships a portfolio of signi cant budgets expertise in a trend (i.e., social media or e-commerce) some technological savvy a unique IP that they own But, fear not: few agencies have ALL of these qualities. Chances are that you, too, need to expand in some of these areas and build value. Well, the Prosper Group can help you develop as many of these qualities as possible. One strategy to consider: merge with, or acquire, another agency that has an expertise you lack or one that perfectly complements yours. This will broaden your capabilities and new spawn new synergies. Prosper Group has expertise in assessing agency value. Plus, our M&A Leader can help nd the right strategic partner, if need be. Together, we ll build value and map out the right exit path for you.

13 Exit planning: a vital process to ensure success Now that we ve built agency value, let s consider all your various exit options. It s essential to determine which path will meet your goals both personal and nancial. Plus, we must consider the agency s readiness for each. Ask Yourself: Q: Does my senior team qualify leads and craft winning strategies? Q: Is my sales process formalized and consistent from pitch to pitch? Answering "YES" to both is the key to your transition and sale. This means you must help your managers thrive without you. And you must cultivate a winning sales culture. Let s say that a sale is your best option. Should you sell to your senior team? An outside group? Establish passive ownership? Or recruit an heir apparent to take the reins. Whatever path you choose, the rm's structure may need to be redesigned to support your transition. There s much to consider and thoughtful planning with the help of an expert advisor is the key to a successful exit. Just remember that you are not alone. Prosper Group has helped many owners determine their ideal exit path. Plus, we can minimize the perception of risk and position your agency to be highly attractive to suitors. Then you can embrace your dream role with con dence.

14 Prosper Group's M&A team GET TO KNOW OUR DIGITAL AGENCY EXPERTS TODAY: Click to see Doug Baxter's video bio Click to see David Bosses' video bio

15 About the Prosper Group At Prosper Group, we have the experience to grow your agency and maximize its value. Each partner here has owned, managed and bought / sold a successful agency. So, we understand the challenges you re facing. Together, we can solve your most pressing problems. Propel agency performance. Knock down the barriers to growth. And help your rm become a more valuable asset. Then, you ll have more viable options later on to capitalize on your life s work. After all, your rm is a means to an end. Improving and selling it for a premium price is the key to securing your future. Yet, unlike many M&A rms, we won t rush you into a sale. We ll carefully consider your nancial goals and personal needs. Then, we ll map out the best path for you. We hope that we can become your partners for prosperity. made with