Sell Creative Agency

You’ve poured your heart and soul into establishing your creative agency and turned visions into thriving realities for your clients. Now that you’re thinking about the next bright chapter, you may be wondering about the steps involved in the process.

In this post, you’ll discover how to sell creative agency and the procedures you’ll go through until you seal the deal with a buyer.

How Much Is a Creative Agency Worth

There is no fixed amount that a creative agency can sell for. It will always be based on the company’s financial performance and the current market conditions.

When it comes to valuing your creative agency, several key metrics that determine agency valuation come into play:

• Your recurring revenue
• The agency’s growth potential
• Financial health evaluation using the following:
  • Accounting records
  • Tax returns
  • Financials (cash flow, income statement, balance sheet)

One of the major factors that increase agency valuation is the size of your company. Generally, larger agencies with higher cash flow command higher valuations. For example, an agency generating $300,000 in annual profit might be valued at a lower multiple compared to a similar agency bringing in $5 million in cash flow.

Preparing Your Creative Agency for Sale

The best thing about getting the results of the valuation is that it reveals growth/improvement opportunities. Your business broker will give you an assessment of which areas of your business can be adjusted to achieve a higher valuation. To give you an idea, here are just a few improvements you can implement before selling your digital marketing agency:

• Establishing reliable financial documentation. Financials need to be clean and updated. 
• Building a strong management team. Solidifying the management team creates operations that will run without much supervision from business owners. This is what buyers are looking for—a business that can run on autopilot.
• Diversifying your client list. Agencies vary in client composition: some rely on numerous short-term, pay-as-you-go contracts, while others depend on a few high-value, long-term clients, with most falling in between. The revenue distribution from these clients affects the agency’s valuation multiple. For instance, if 80% of revenue comes from just two major clients, with the rest from smaller clients, the agency is seen as riskier. After all, losing one key client could instantly cut 40% of revenue.

Exit Strategy for Creative Agency

It’s not enough to aim for the company to be sold. Remember that you’ll be leaving clients and employees behind. Any advice about how to sell a creative agency will tell you that without a proper exit plan, the legacy of your company and the reputation you’ve built might get compromised.

As a business owner, your role is to ensure the company’s continuity. What are the strategies that secure this outcome? Find out below:

• Partial sale or equity partnership. Partnering with a PE firm or strategic buyer through an equity structure gives the company access to capital, technology, new markets, and expertise, which can boost the agency’s market position and its EBITDA multiples.
• Complete sale to a larger agency or holding company. Absorption by a larger entity often results in a higher sale price due to the buyer’s ability to pay a premium for strategic fit. Holding companies value agencies that complement their portfolio (e.g., adding niche expertise in digital or healthcare marketing). The financial backing of a larger entity reduces risk for the seller, as buyers are less likely to default on payments.

The Process of Selling a Creative Agency

After formulating your exit strategies, getting your business appraised, and establishing your market position, promoting it to potential buyers is the next step. Working with business brokers and M&A advisors makes this step, along with subsequent processes, efficient.

What should be the timeline expectations? There is no standard timeline. If you look at statistics, the selling process can be as short as a couple of weeks to as long as 12 months. The complexity of the deal is bound to affect the length of the transaction.

Finding and vetting potential buyers are also part of the services delivered by business brokers like the WebsiteClosers.com team. Some brokers may use social media and public listings (with generic descriptions and details to keep the sale private). Those who prefer to be more discreet are given access to a pool of buyers.

When you accept an offer from a company, due diligence and negotiations start. Yet another advantage of working with business brokers is their expertise in negotiation tactics and common pitfalls in deal-making. During due diligence, they manage the flow of information between you and the buyer, swiftly resolving concerns to ensure the deal progresses efficiently toward a successful deal.

Maximizing Your Agency’s Selling Price

“How do I sell my creative company?” When your goal is to take home as much money as possible, your strategies should lean toward making your agency attractive and irresistible to buyers. First of all, a buyer will only purchase your company if they see how much profit they would make. In other words, demonstrating growth potential for buyers is a necessary step. Prove steady revenue, at least 65% gross margins, and multiple income streams, like brand strategy, courses, or consults. This tells buyers your agency isn’t built around just you or one risky source of income.

Strategic timing of the sale also contributes to better business valuation. An internal factor to look at is the performance of your company. Has it reached its peak? Then it’s time to reach out to a potential partner who has the resources to grow the company.

Tips on how to sell a creative advertising business will tell you that it’s worth investing in strengthening your digital capabilities and portfolio. However, this step should be planned carefully. Let’s look at the case of AI integration within a local creative agency. 

• While it’s true that AI can produce images, it is perceived as less authentic. 
• According to Country Fried Creative owner Joe Domaleski, AI shouldn’t be a driver but a tool that aids in making smarter and faster decisions. Since AI is a fast data processor, it can be used to brainstorm ideas for content. It shouldn’t be used to write content, as the brand will lose its authenticity.

After the Sale: Transition Planning

Before selling a digital creative agency, a transition plan should be prepared in advance. From managing the announcement to clients and staff to earn-out structures, tax implications, and performance incentives, every objective should be outlined so that there will be no room for uncertainty when it’s actually taking place.

Make way for a seamless transition and maintain operational continuity by laying down each team member’s responsibilities with clarity. Guarantee their job security as you prepare to step away from leadership. Define their tasks so that the business’s organizational structure is easy to understand for the new business owners. Clear definitions of roles and assignments reduce the likelihood of operational disruptions under new ownership.

You also need to focus on solidifying long-term client commitments and establishing consistent revenue flows. When you establish stable income and future profitability, you enhance the organization’s appeal.

Conclusion

“I will sell my creative agency, what’s the next step?” Deciding to make an exit is the first step to making it happen. Get a business valuation from a professional so that your asking price is accurate. Start the promotions, enter into a deal with a buyer, and once it’s successfully closed, execute your exit strategies.

While it may seem easy, selling creative agency is a transaction that can be smoothened when you are partnered with excellent business brokers. Work with WebsiteClosers.com. Our brokers deliver excellent exit strategies so you can close the deal around your asking price.

Free Business Valuation Learn More