Six things to consider before selling your agency
As an entrepreneur who has founded, scaled, and successfully sold a business, and who has been involved in many successful M&A transactions, I've learnt valuable lessons that are essential for anyone considering a similar path.
I meet many agency owners who don’t understand the complexities of selling their business or the importance of getting the right people and skills around them to maximise their return on investment. They also don't realise how crucial it is to choose the right partner to help them achieve their ambitions and support their team's career paths.
Where my journey began
Like many of you, selling my agency started with receiving emails asking if I was looking for investment or if I’d be interested in selling. At first, the idea of selling my agency hadn’t crossed my mind, even though scaling the business was a constant challenge. We were ambitious, and I didn’t really understand how valuable the business had become.
The interest started when we were recognised in the Deloitte Tech Fast 50 and European Fast 500 league tables. After that, I began getting phone calls and emails about investment and selling opportunities. While the offers to buy my business, were flattering, I soon realised these were often tactics to buy agencies "off-market" at a lower value.
Understanding my agency’s value
I realised I didn't have a clear understanding of my Agency’s true market value. If I was going to sell, I needed to know the correct value of the company, not just what someone was offering (even if the numbers seemed high).
It's similar to when someone wants to buy your house and tells you its worth based on square footage alone, without considering other factors like location, decor, desirability, historic features, great local schools, or current market demand. You’re more likely to get a better price if you have your business properly valued and then find buyers who meet your criteria, similar to how you’d sell a house considering different types of buyers and their circumstances.
When to enter M&A discussions
I realised there’s no point wasting time on selling discussions if you’re not at a valuation figure you’d consider selling for. I also learnt that the people who provided the valuation could also tell me how to potentially increase the business’s value by improving certain things.
It’s important to avoid getting drawn into early discussions and to let potential buyers know that you’ll reach out when ready. This can prevent business disruptions. Cold contacts could become good partners, but be cautious not to rely too heavily on them. It’s a good way to test the waters, and I did find a couple of valuable partners this way.
Why I decided to sell
Eventually, I felt exhausted and struggled to scale to the next level. Growing organically had reached its limit. We wanted to scale faster and provide better career opportunities for our team, including larger and international projects. However, the pressure and pursuit of growth led to early burnout. As the sole founder, I felt the strain of competing against larger international agencies while our organic growth slowed to 25% a year, which wasn’t enough to compete with the biggest agencies.
I sought advice from my non-executive consultant and explored options to secure the best future for our team. This led me to seek professional advice on the sale process.
I discovered there were many more options than I realised. The process of selling my Agency started with getting a valuation, then finding the best advisors who could help optimise the business value and guide me through the best options to achieve our goals. It was crucial to find a company that could help us find the right partner, rather than just reacting to speculative offers (although we did consider some of those).
I also felt I needed to realise some value for all my hard work and sacrifices. I’d heard stories of people who held onto equity and then lost their business in economic downturns. When the valuation came back, the advisors said the timing was excellent for a higher multiple. They explained there was high demand for my type of agency and that I should take advantage of that. Growing bigger might increase profit, but the multiple could decrease, leading to less value for the extra work.
My top six pieces of advice
From my journey of selling my Agency, here are six essential pieces of advice for entrepreneurs considering selling their business:
1. Understand Your Why: Clearly define why you might want to sell your business one day, aligning it with your long-term goals.
2. Know Your Value: Get your business valued and set realistic growth targets to achieve your desired valuation.
3. Seek the Right Partner: Don’t rush into a sale with the first offer. Find a partner with a matching culture and mutual ambitions.
4. Focus on One Business: Concentrate on building and scaling one successful business rather than diversifying too soon.
5. Stay Agile: Understand market demands and evolve your services to maximise value.
6. Plan Ahead: Start speaking to advisors about 18 months before any potential exit plans to prepare your business for sale.
These insights, based on my firsthand experience, are crucial for navigating the process of selling a business. By focusing on building a fantastic agency with a strong culture and exceptional client experience, entrepreneurs can pave the way for future success, whether scaling up or starting a new venture.
In my post-Agency journey, I co-founded a consultancy. Our first hand experience in starting, scaling, and exiting businesses has equipped us with a unique perspective to help others. With an in-house team of agency consultants, we assist entrepreneurs in optimising their agencies and maximising value.
Remember, selling a business isn’t just about closing a deal - it’s about shaping the future of your company and its people. With careful planning, strategic foresight, and trusted partnerships, entrepreneurs can navigate this journey with confidence and achieve great success. If you would like an indicative valuation of your business, check out our free agency valuation tool.
