I want to thank David Rodnitzky for writing the book “Selling Your Marketing Agency: Making the Most of Your Most Important Deal” – an excellent book I have wanted to write for a few years. It would have been a great resource when I was selling my first agency.
David has experience buying and selling agencies in different formats and approaches. David has laid out the mind-numbing process in excellent detail, saving me from writing a book on the topic. Thank you, David! While this is a book on selling a marketing agency, a significant portion can be a solid reference for someone selling any small or medium business.
David starts by telling the readers they must ask themselves the most crucial question: “Why do you want to sell?” Most people think of it as a way to cash out and retire, but few actually do. Trust me, I have tried it a few times, and like me, they get bored and move on to something else. He explains some reasons people cannot stop working once acquired, ranging from earn-outs to frustration to boredom.
The book details the reasons for selling, how to find a buyer, and, most importantly, how to prepare for the sale. Unless you have been approached, you will need to find someone who wants to buy your agency. This can happen when someone sees you winning clients or, in my case, taking their clients. If you are the driver of the sale, he outlines how you can find potential buyers and recommendations for using brokers and other intermediaries during the process.
Knowing what buyers are looking for in an acquisition as and preparing for due diligence is essential. He lists the most common reasons to acquire an existing agency:
- 1. Revenue
- 2. Unique technology or solutions
- 3. Specific industry focus, or deep vertical specialty
- 4. Skilled people they can use right away (acquihire)
David suggests that long before that first meeting, you need to be clear about what makes you stand out. Why would anyone want to buy your company? That will be the flagship ideal that you need to focus on. For example, it is a given that you should have decent revenue, but what about a long-term loyal client base, especially in a specific vertical or size of client? Long-term relationships with real clients can attract buyers.
The chapter on preparing for the sale is one of the most valuable things you should start on the day you launch the company. Even if you’re not considering selling today, start preparing because it’s good business practice. David’s reasons for acquisition are all tied to the belief that you will add incremental value to the acquirer, making demonstrating that value critical.
David’s detailed account of the due diligence process is spot on. You must start early to get your ducks in order because the accountants and lawyers will not just take your word for it. Buyers will investigate your finances thoroughly and sift through contracts and other documentation. When we sold Global Strategies to WPP/Ogilvy, the auditors verified every contract and purchase order. They spoke with clients to verify the documents and weigh their likeliness to keep working with us. We had ten large binders of just the account verification data.
David gives an excellent personal experience description of what happens post-sale. As noted, you need to understand and accept why you are selling your company and what you are willing or able to do once you are part of a bigger company. When joining a bigger company, it’s important to think about how your business will fit in with theirs. There might be conflicts between clients of each agency that will need to be resolved.
A must-read book if you run an agency!
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