Today’s segment will be on selling an Advertising or Marketing Agency with WebsiteClosers.com. For purposes of this segment, I’ll just refer to selling either of these two business models as a “marketing agency”, although they certainly are usually different. The vast majority of marketing agencies today focus almost entirely on digital marketing campaigns. Print and traditional advertising might also be represented by the agency. Because the skills necessary to market or advertise a digital business vs a bricks and mortar business are usually quite different, for this segment will just stick to advertising website properties, which is usually focused exclusively on digital marketing, whether it be in the form of PPC management, SEM/SMO development, press release submissions, content management, monitoring webmaster tools, managing and developing email campaigns (html template creation, list management, etc.), consumer shopping engine management, product feed management, and more.
To identify how to sell a Marketing Agency, one must first look inside the company. The agency is a service-oriented business, and thus, many times the value of the company is connected to the owner. Sometimes the owner has long lasting relationships with service providers or with merchants, so if the owner leaves, merchants could be concerned whether they will continue to receive the same level and value of service they’ve become accustomed to receiving under current ownership. So, it is highly critical that when an agency owner is preparing to exit his business, that he call a professional brokerage with experience not only in owning and operating digital businesses, but also one that has sold these companies in the past. The brokerage can work hand-in-hand with the owner to identify whether now is the right time to sell, and if not, will work to create a time-based strategy to facilitate the sale without alienating clients. WebsiteClosers.com has this experience and patience necessary to help an owner with any questions he or she may have, and when the time is right, we will be there to help you with the sale of your valuable asset you’ve worked so hard to build.
Additionally, many agency owners want to know what buyers are looking for when reviewing agencies for sale. Our experience has shown that the primary driver is whether the business has a specific niche it caters to, helping it to stand out from the crowd. Also, the financial performance of the business, especially cash flow, needs to be strong, and in perfect world, growing month over month. And also of importance is the client list. Do any of the clients have a particular relationship with the seller? Do any of them represent over 10% of sales? Can reoccurring revenue be planned into the acquisition business plan?
And when it comes to the price you can expect when selling a profitable marketing agency, these businesses tend to go a bit higher than general websites, somewhere between a 3 to 6 times multiple of seller’s discretionary earnings. Factors that can influence these multiples include: whether sales are in an upswing, static or trending down; the level of competition (or market share) of the business; the firm’s placement organically in major search engines like Google, Bing and Yahoo, and many more.
The final point I’ll make today on the sale of marketing firms involves the standard structure you see in most deals today. It’s an important note because they do tend to be different than a website acquisition. The trend today seems to be a one-third down payment, one-third in bank financing and one-third in a seller-financing promissory note or performance-based earn out. While this is the standard, and something you’ll hear when talking to other brokers, we have experience maximizing cash at the table for agency owners to the tune of 85% where the owner takes a 15% note on the business (not an earn out). This is much more beneficial for both buyer and seller. The buyer only has to put down 10% to buy a business and the seller receives 85% of the transaction in cash with a guaranteed promissory note (rather than a performance-based earn out). Our network of bank relationships will surely help buyers desiring to minimize cash outlay, allowing the company to pay for itself over time.