We’ve all got those “someday” wish lists. We imagine retiring to our ski cabin in Colorado or a beachfront condo in Florida. We dream about the vacations we’ll take, and the sights we’ll see, and all that extra time we’ll have to learn to sail, or cook, or golf (better). There are all those projects we’ll finally get to: start a garden, brew craft beer, and download all those digital photos trapped on memory cards.
But, if you’re an agency owner or entrepreneur, sometimes those days seem far out of reach. Consecutive 80-hour-work weeks make it feel more like “some day” means “no day.” I’m here to tell you not to get discouraged. It can happen, and it will happen. There’s one simple thing you can do to make your retirement bucket list a reality: Build a business worth buying.
Whether selling is something you are actively pursuing or something that’s in the more distant future, the key to a successful and profitable sale is understanding a buyer’s reason for buying. With this knowledge, you can build something actually worth buying.
Most entrepreneurs are finishers, and they think they can’t step away until they’re finished working. This translates into thinking you can’t sell your business until you’re ready for retirement. However, in my case, I had met my goal of building an agency that brought in $10 million in revenue. I wasn’t interested in doing what it would take to get to the next benchmark. And when the right opportunity came along, I sold my agency.
Everyone’s reasons for selling are different, but a buyer’s reasons for buying can usually be put into one of three boxes. Understanding those reasons -- before you’re actually looking to sell -- will set you up for a profitable business now and an attractive future sale.
Reason #1: To grow and scale more rapidly.
If you’ve got a totally buttoned up process for this or that or even a few things, someone is going to want it. If you’ve got rock star talent on your team, someone will notice. The point is that a prospective buyer will be attracted to your processes or your talent, and they will realize that buying your agency will help them scale and grow much quicker than if they develop the systems or acquire the talent organically.
What you can do now:
Since honing processes and building a talented team takes years, focus on it now. Develop processes that everyone’s talking about. Maybe it’s your delivery system or your scoping process ... Pick one or few things and do this better than anyone else. Partner agencies, competitor agencies, clients, and industry colleagues will talk. Be famous for it.
When it comes to talent, most small agency owners think they can’t afford the best. In my experience, it’s really the best that want to work for smaller agencies. There’s more autonomy at smaller agencies, and it’s easier for creativity to flow when it’s not being stifled by corporate procedures, stuffy legal departments, and an HR-enforced dress code. Don’t think you’re too small to attract big talent. You’re probably just what big talent wants and needs.
To make sure you have all "A" players, assess your team. Grade them A+ through F- based on the following criteria: Consider first what traits spell success for a particular position. What would the ideal candidate for this role look like? Base this not on their résumé but their actual skill set. With an understanding that it's these traits that drive performance, grade your employees based on whether they fit within the parameters you’ve identified. Use these grades to make tough decisions about your team, and follow these best practices:
A players make a positive difference on the agency every day.
B players are on the right track and can be coached to A players.
C players may be in the wrong role and if switched could become a better player.
D and F players are not on the right track, cannot be trained, and are impacting your business negatively.
Making sure you have the right people in the right seats can be a lot of work, and it can only be done over time. Good processes and good talent aren’t mutually exclusive. With the right team in place, processes won't be an issue which means you, as the agency owner, can work on growing instead of fixing things. You can be proactive instead of reactive. In addition, your agency’s reputation for great talent or great processes in the industry can even land you an inbound acquisition offer.
Reason #2: To have a presence in your geographic location.
Sometimes a great agency is looking to expand geographically. Rather than starting at square one and opening a satellite office in a new location, a buyer will look to acquire an agency that’s already established in his desired location. It might sound like dumb luck or a right-place-at-the-right-time kind of situation, doesn’t it? But you can stack the deck the in your favor.
What you can do now:
Make your mark. Make a name for yourself. I owned my digital agency for 12 years, and during that time, we found ourselves on a lot of “top” and “best of” lists -- Atlanta’s Best Place to Work, Top 25 Small Businesses, Top 10 Most Dependable Web Design Firms in the Southeast, Atlanta’s Top Marketing Firm ... you get the picture. I don’t tell you this to impress you but to impress upon you that lists mean something to people. Build an awesome agency, and make sure everyone knows about it. Local titles, awards, and honors will put your firm on the map. It’s not the ADDY’s that get you recognition, though they’re nice, too. Getting your name on these lists is like marking your territory. It makes you appealing to clients, talent, and eventual prospective buyers. Why would a buyer move into your location and compete with you when they could just approach you with an offer and be you?
Reason #3: To obtain a bigger piece of the pie.
It’s like the old adage: It’s not what you know but who you know. And just as badly as you want to do good work with big clients, so do other agencies. This type of buyer is either motivated by your client list or they’re after more of the dollars those clients are spending (such as a traditional agency that is looking to acquire a digital agency). There are two ways you can grow your business while also attracting this type of buyer.
What you can do now:
First, specialize. Find your niche, and appeal to those specific clients. Don’t be afraid of it, embrace it.
All too often, I’ll be coaching an agency owner who tells me they don’t want to specialize because they don’t want to turn off or turn away potential clients. Niching does not mean turning away business. It means focusing your time, your talent, and your resources toward one type of client. Maybe you’re best at medical marketing or maybe it’s automotive, banking, and finance, or maybe you know how to market law firms -- develop specialization. When you establish yourself as an authority in marketing in a specific industry, you are also establishing yourself in the agency community as an authority in that industry. When a competitor or an agency who offers complimentary services is looking to grow, they’ll look to you as a way of doing so.
When I sold my digital agency, it was to a partner agency that we’d worked with on several other projects. The agency was larger and had complimentary services, and at first, we were looking at ways to bring each other more business. After a closer look at what we were doing -- our processes, our talent, and our clients -- their leadership presented an acquisition offer.
If your agency can be #1 at one core service or one industry and use it as a foundation to be a leader in that market, you will grow and scale your business. And you'll get noticed.
My best advice is to build your business to sell, but treat it like you never will.