The Acquire Playbook: Buying and Selling Agencies | Webinar Replay

Foreign.

You want to. Let's get going. We got, we got a full house here. Let's, let's kick this off.

Let's do it. Let me share the screen.

All right, everybody, we're going to get started here. We're going to be going over the acquire playbook, buying and selling agencies. I'm really excited for this webinar because we in the past have mainly been focusing on SaaS businesses, helping hundreds get acquired, helping people find amazing SaaS businesses to acquire themselves. Step in a CEO now we're helping agencies. So if you don't know that acquire helps agencies, we do. We've helped a number of them get acquired and I love these types of businesses. They're great acquisitions for individuals that may not want to deal with a product. Maybe you aren't technical, maybe you have a really strong background in sales and marketing and you're looking to step in to being a CEO of a business. Agencies are great. Or maybe you own an agency and you're looking to sell that business to start something new or cash in your chips. Whatever it may be, we're excited to help. So without further ado, let's keep going. Kai. So as an agenda, we're going to do quick introductions, go over why agencies matter, why they rock, and also the old vers new thinking, you know, some thoughts you may have about agencies. We're going to dive into those and give you our take how to measure performance of agencies. And then we also have some live agencies on the marketplace that we want to go over, show you what we like about them and really just discuss what makes them a good acquisition and then the agency playbook. So if you are interested in selling your agency with us or you're looking to buy one, we can help either one of you in terms of our impact as a company. We've been in business for over four years. We've helped over 1200 startups get acquired. That's translated to over 750 million in closed transactions on the platform. Today we have over half a million registered buyers, so lots of activity on the sell side and also the buy side as well. Currently There are over 600 active listings on the marketplace, so lots of different businesses to look through depending on the type of business you're looking for and also the size. So if you're looking to acquire an agency, we have those on the marketplace. If you're looking to acquire a SaaS business, we obviously have those two. And then we are a global company. We've served over a hundred different countries and I like to say we're always just getting started.

Clearly global too by the presentation in the chat here as well.

Yeah, definitely. Global acquisitions are everywhere. For those of you that may not know me, my name is Andrew Gazdecki. I am the founder and CEO of acquire.com I previously founded two different companies going through the acquisition process specifically for the company business apps up here on the side. That process really opened my eyes to just how difficult getting acquired can be for entrepreneurs. And so I thought, you know, this is a problem worth fixing and so started acquire.com and here I am.

My name's Kai. I'm the lead acquisition advisor here at Acquire. Some of you may know me. It's nice to see some of the familiar names here. I work directly with our sellers and buyers to help them navigate the deal journey. It's been a pleasure to do so. It's a very entertaining and variable job in terms of every deal is different, everyone has a different business quality, buyers all have different valuation methods. So it's a lot of engaging conversation that I get to have and it's a pleasure to be in the webinars with you guys and educate and answer some of your guys questions. All right, let's get into why agencies matter. Andrew, I'll let you start out with talking about some of the biggest success stories that agencies have really been a part of.

Yeah, definitely. So the short story on this slide is agencies rock. For those of you that don't know, Slack used an agency for help designing their user experience and a user interface. A firm called Metal Lab Spotify use ThoughtWorks for backend development. Apple use Ideo for product design. So behind a lot of just awesome startups, tech companies are typically sometimes agencies for design work for R and D, for marketing, for sales. It really has no limits. And this is what can make agencies so awesome is they can supplement existing businesses and support really fast growing companies with whatever they may need help with. Again, from design to development, marketing, sales, you name it. There's definitely an agency that's around for that service and probably doing really well. So you might be wondering, you know, why are they often harder to sell? Well, it can really depend on the type of agency. But generally with agencies you're going to see sometimes issues with the talent in the business. Maybe the owner of the agency is the main reason they are are able to attract customers. Maybe there is a lot of customer concentration in the business where there's one really large customer that's taking up all the revenue. Maybe there's a lack of recurring revenue from the business and a lot of the services are being rendered as one time services. And so these will make any business typically harder to sell. But we see them more often in agencies. All of these can be addressed which makes them great acquisition opportunities, but as well will bring in a little more initial risk. But there's also a lot more benefits and downsides to agencies which we're going to go over in this presentation. And really the reasons why you should consider buying an agency is, you know, again if you don't want to have to deal with a product or bugs or you know, having to keep up with competitors in terms of new features, agencies can be such a great business to buy. Or maybe you're really good at sales or marketing or maybe at your current job you are, you know, VP of marketing or VP of sales and you can give other companies this service. At scale, agencies can be a really, really, really good business to buy. But I'll hand it over to, to you Kai. Let's keep going.

Yeah, of course. So let's talk about some of the, I guess, stigmas or thoughts that go through one's head, specifically a buyer's head when evaluating an agency. So what are some of the roadblocks that could be there? If you're a seller, these are some of the roadblocks that you want to think about. I think one of the biggest concepts is not every founder starts their business to sell their business. So they may not even think twice or even once about some of these elements. But you can think about them now. So number one here, the business can't make money without the founder. A lot of the times the face of the founder is the business itself. So you think about, I think about acquire. Andrew, you're very well, whether you like it or not, the face of acquirer. But I'm sure there are things you've thought about to disperse the attention, to make sure that customers know that you are not the engine of the business, things like that. Have these ever dawned on you early on in your business career? Or is this something that maybe came about as you got more popularity with some of your exits?

Definitely. I think it's kind of a double edged sword because I think the founder brand and you know, you always want a cheap ambassador for a business and especially as you're starting it, it's almost necessary because you don't have a sales team, you don't have others to take the, to delegate all the work towards. So you have to end up doing everything initially. But over time, yeah, you want to de risk the business, you want to delegate some of the work, you want to stand up other marketing channels because it makes your business more valuable and then allows you as the owner, the founder, to focus on other areas of the business so it grows faster. But definitely in agencies it can be, it can be typical. And you know, that provides, like I said before, you know, additional risk when acquiring the business, but also a lot of opportunity if that is the case.

Yeah, yeah. And I would say one of the most common questions I get from buyers on agencies is what are the sales channels? How are you generating customers? And if the only answer is kind of word of mouth or directly through your connections, you could see from the buyer shoes how that could be a problem. It's better to have started something and expanding how you're getting customers than just solely relying on the notoriety you may have.

Yeah, I think the hardest, the hardest situation would be where if the agency owner is delivering all those services and getting all the customers, where maybe the star engineer, it's a development firm or something like that, or design firm, so they're getting the customers and delivering the services. So you know, put another way, when they leave the business, they're taking all the customers and then all of the talent as well. So something to keep note of.

Absolutely. Moving on to point number two. Customer concentration is really what this point is. Revenue derived from one or two large customers and not only customer concentration on the sheer amount, but the disbursement of kind of the contract value. If you have two large customers making up 60 plus percent of your revenue, and maybe you have eight other customers making up the rest, it provides this perceived, well, actual risk, in my opinion, that if one of those big customers leaves, then the predictable financials have changed dramatically and almost all valuations are rooted in some sort of reference to the historic financials and the trajectory ahead. I really attribute this. If you have some sort of imbalance in your distribution of customer contract size, I attribute this to still yet to define your icp. And what I mean by that is if you can develop who your ICP is, you start getting more and more customers that are capable and have need of that type of contract value and then the disbursement kind of plays itself out. Do you have any, any evidence or thoughts on why kind of this imbalance can come about?

From what I've seen, it's typically when you're just starting out as a company and you, you know, you land two really large customers and you haven't figured out that go to market motion, like you said, to get more of these types of customers to expand the business. And then you're stuck in this kind of trap of, you know, you're servicing these large customers. You don't have time to, you know, think about, go to market, sales, marketing to get new customers because you're constantly serving these really large existing customers because they pay all the bills, they're extremely large. Maybe the agreement you have with them is really extensive. So you're doing, you know, 20, 30 hours a week. So it takes up all your time. But typically that where you just haven't figured out, like you pointed out, a way to go consistently get more of these types of customers.

Absolutely. And by all means having large customers is a good thing. You just want more of them. You want it to be dispersed across your business. Moving to point three, too service oriented as some agencies are perceived, which can affect their ability to scale. If there are employees involved in distributing the services, every employee has a capacity. So unlike compared to maybe a productized service, the ability to just ramp up rapidly now involves assessing when do I need to hire more and at what cost do I need to hire. And this just makes the trajectory less and less. Automation is a huge word in businesses in terms of the effectiveness of it. Andrew, how much does automation play a part in your day to day and what we do here?

A lot. I'm really any business should be thinking about.