Making Your Creative Agency Attractive for Acquisition

All right, so we have a little treat for you. So this is a coaching call from the Agency Owners Association. This is a group that Neil and I have for agency owners to help you grow faster. So if you're in the agency space, you are a services business, this is applicable to you. It's a little preview of a call. It's probably 10, 15 minutes or so, and you get a sense for what it looks like to be in the group. If you want to learn more about the group, you can go to marketingschool.io/agency. Again, it's marketingschool.io/agency. Hope you enjoy the episode.

One of my questions was, I just go ahead and do it. I'm getting so much inbound these days trying to acquire my company and I don't understand why. And I don't know if you saw the notes, but I just wanted someone to explain to me why I'm getting so much inbound to try to buy my company. I don't have automation in my company. You know, I don't have like recurring revenue stuff that a lot of you guys have because I have a brand strategy agency, media buying. I do a lot of custom development for really large companies, so it's not You know, it's not set up for, you know, rolling things. I have contracts, but not like— I feel like you all have a lot of just invisible money that when you're sleeping, like people are signing up for things. That's just not how my company operates. So anyway, I just— my question was, what my question really is, why would anybody want to acquire a company that doesn't have the things I just mentioned, the money while you sleep, And 2, if I was ready to sell my company, what would be, what would be, what would, what ideas could you share that would say, you know what, these are the types of things you should do to make your company more appealing for someone to wanna buy? And I say that my business, I've been in business for, um, almost 30 years. No, wait, I'm sorry. I've been married 32 years, but my business has been almost that much amount of time. Um, So I have a lot of brand authority and I do have assets that I could sell that are connected to the company name. Um, and I also have certifications as a woman-owned business and a Black-owned business. So if a woman-owned or Black-owned wanted to acquire my company, it would probably be, you know, easier for them, right? Because I have all these things. So anyway, I'm really interested to hear what you all think because I actually have a couple of very serious interested brokers, not buyers, brokers that are like, we have people that want your company, which I'm like, okay, why? That was my first question. My second question was, um, I have—

Just go with your first for now, Ginger.

Just because—

okay, that's totally fair. Totally fair. Totally fair. Yeah.

Go ahead, Kevin.

Sorry, I got a lot of opinions. Um, no, I like opinions. I've had 3 exits, um, software services, uh, a couple, um, franchise. Um, the key that I think today, what's happening today, why there's a lot of activity is a lot of baby boomers are retiring and they don't really have a way to get rid of their business. So there's a lot of brokers who are scraping, uh, businesses that they— there's a buyer out there and there is a lot of smart money out there, buyers that are buying businesses probably at a lower valuation just because the company's not ready to sell and they have the team behind it to bring in management, marketing, whatever to spin it up. And then maybe they have already interested buyers at a higher level like PE firms, things like that, that would buy it if they built it up and set it up for sale, if you will. Definitely monthly recurring revenue, MRR, is a key. So, you know, if there's a way to find, ideate and find services that you could offer your clients that give them peace of mind, maybe after the project's done, where it's kind of like a support contract, or there's lots of, lots of ways to do it. I don't know exactly what you do. Happy to— I've done this for a lot of startups. I'm in kind of one of the top 10 incubators in the world in here in Cincinnati. And so I do a lot of mentoring with startups. So we do a lot of planning for exit at the beginning. But yeah, I would just say definitely want to build up your— the more MRR you have, the more valuation multiple you could get. The other aspect is, is the business dependent on you? If you won the lottery today, would the business be able to operate by itself or, you know, with somebody there? You want to get to that point. The more closer you are to that, the more value there is for a buyer. I'll leave it at that. Other guys probably have other ideas as well.

Kevin, I guess that's— I guess that's my point, though. I just answered your question. Like, no, I, the company does not run without me. If I won the lottery tomorrow, I would walk away and I would probably buy property in France and never come back to the United States, number one. But, and yeah, I'm not, I'm just not set up for that. I have, I, you know, I have a degree from an art school. I graduated with a branding and visual communications degree. I do a lot of marketing strategy and creative strategy. a lot of media buying for really large companies. And so I'm not, I'm like, if you were to think of a, if you were to think of a, I don't know if you're familiar with the branding world, but companies like Landor, which I'm not at that level, but like that's the kind of work that I do, right?

Oh, interesting.

The type Landor or Pentagram, things like that.

Right.

So I'm really, I'm really a, you know, a creative agency that happens to have a very high competency in the digital marketing space.

Got it. Yeah.

So I guess, I guess that's what my question is. I'm not understanding why these people are interested in putting my company up for market because I'm not, I'm not digital marketing. And maybe there's just confusion in terms of what digital marketing is versus creative marketing. I don't know.

I'm sure everybody here is getting the same emails, but I, I get—

okay, that's fair.

I get 6, 7 a month. People just throwing out there, do you want to—

are you—

hey, Kevin, are you open to selling your business? Are you open to doing this? So it's definitely a hot thing right now. It seems like a lot of brokers are going after agencies. They might not know what you do. They haven't done their due diligence many times to get you on the phone.

They haven't done due diligence. Okay.

Yeah. So due diligence, that's another thing you're going to want to do to prep for selling is to have a book or like a virtual book, if you will, that has all your financials, all your, you know, everything's kind of there that you could hand to somebody Digitally or physically that would allow them to do due diligence. That's going to increase.

Yeah, I have that. Yeah, I appreciate that. I do. I do have that. I have all that, which is again why I'm still, you know, I guess I'm just, you know, I mean, am I ready to sell? Maybe. I have 3 other companies, you know, like, I don't— I'm an entrepreneur. I don't need this company, you know, really. So And that's, that's my second piece is if I, if I'm not interested in monthly recurring revenue, because I'm really not, I'm not interested in setting up my company like that. What would I do to make it, you know, somebody would want it? Like, why would, you know what I mean? That's like, what would you, what would you—

I think it would probably take longer than what we have on here to kind of brainstorm with you, but I'm sure we would love to do that.

You know, I got to take a minute to tell you about the Agency Owners Association. This is a peer group for agency owners. Think YPAs. PO or EO, but for agency owners. And I just wanted to read you a couple of testimonials. So this first one comes from Carrie, and we asked her, what do you like most about the group? She said, having a group of people to discuss and bounce ideas. The leads are great too. Yes, we share leads in this group as well. This one from Ollie, and he says, the ability to really post whatever I want and need, and the group responds. Great experienced members. Getting a lot of insights from conversations with other members. Getting a lot of value from sessions from Eric, getting advice from others as well. And so if you want to grow your agency faster and you want a peer group to do so, just go to marketingschool.io/agency. This is a group that both Neil and I created. And our hope here is to create a vibrant community of agency owners and do a lot more with it in the future. So again, marketingschool.io/agency, and we'll see you inside.

Go ahead, Adam.

Uh, yeah. How do you know if they really have a buyer who's asked them about your brand or they're just scraping, as you say? How do you get them to reveal? if they're actually the real deal.

Okay.

Trying to find like random deals out there.

Who is that to, Adam?

That's to you, Kevin, because you've done this a few times.

Yeah. So, um, to—

I have no idea. That's a good question.

Yeah. So, um, to address your question, Adam, the, um, I think the key is knowing what your— how you place in the marketplace of your competitors and stuff. The more you know, the more— like, if people are just inquiring, it's just like spam. Like, you know, you get those SEO emails. If you don't know what SEO is and stuff, it says your site sucks. It makes you feel vulnerable. And so they know how to, um, you know, hit you with those points. Like, hey, your, your, your business is highly regarded right now. You got a marketing agency. We're looking at, you know, we're working on behalf of buyers for agencies. They say all the right things. The key is, is to know what multiple you could probably get for your business. If you're doing $1 million a year, um, you're— let's say you have a 50% profit margin, you're probably going to get 3 to 5 times multiple for your business. Um, it, you know, you want to know some financial, um, aspects of the business, you know, how much of that's recurring, how much of that's Kind of one-off things like that. But, you know, at a high level, you could say, hey, my company's worth about $3 million right now on the low end.

I just want to know if they're full of shit or not. That's really what I'm like. Is this just like—

They're not full of shit.

Someone who asked about our company, or is it just them just trying to— No, they're—

this is them. I'll tell you what they're trying to do. They get paid very well from businesses for doing all the knocking on the door and finding the deals. What they do is they kind of pull you out of the water like a fish, and they see if you're big enough, basically. And if you're big enough, they throw you in the boat.

So they don't really have— I mean, they have people who are buying things, but they don't have—

They probably have high-level criteria, right? I mean, look, you got to like this— take this statistic into account, right? I heard something like 54,000 agencies are launched in the US every year. 10% of them will be gone in the first year. 90% of them will be gone in 5 years. So at a high level, you can look for an agency that's just lasted 5 years, and you know that agency's made it. They've made it a long ways, right? And so they might be someone that you want to pull them out of the water and measure them, right? But that's all they really know is high level, right? Like, okay, you've got a certain number of employees, you've lasted 5 to 10 years, or Adam, you've been in business a lot longer than that, right? But, you know, so I think that's really it, right?

Yeah.

So just canvassers, they're looking for— they're looking for deals, right?

For them to do a deal, Adam, on the bottom, you know, I would say low 7 figures, you know, $1 million or above is really— they'll say high 6 figures, but you gotta really be on the profitable side and the systems. You gotta have a lot of good systems. And it's not a niche that, uh, or it could be very niched and that's what they're looking for. Sometimes their, their buyers are just looking to plug a hole in their agency. So you could be worth on that end. It's worth talking to a few of these brokers and seeing what they're looking for, but just don't have a lot of expectations.

All right, quick note. This is about my company. It's called Single Grain, and Single Grain is an ad agency where we're focused on driving innovation. Wanna talk about a couple of new strategies, and if you need help with marketing, great. If not, here are a couple of new strategies that you should try out. One is programmatic CRO. So we are doing programmatic conversion rate optimization on our site. So it's building products that will automatically optimize your site to increase conversion rates. We're also auto-optimizing, auto-updating from an SEO standpoint. And we're constantly thinking about what else we can do in terms of enriching the visitors that are hitting your website and also tailoring custom messages for them using AI. And so there's a handful of things that we're doing from a marketing standpoint And our mission is just to drive more innovation. So if you want to learn more, just go to singlegrain.com, grain like rice. So singlegrain.com to learn more, and we'll see you inside.

I like it. You seem very definitive, very knowledgeable about it, and it's kind of, it's interesting. So I do appreciate that information, and I'll just kind of think a little bit more about it.

One of the things I recommend is, so I'm on a couple of newsletters for a couple of these brokerage firms. There's a few that specialize specifically in marketing agencies, right? And like, you can get on their newsletter and I get like daily, they'll show me these agencies that are for sale and they give me some high-level statistics or high-level metrics about the agency. And then like, if you want to know a little bit more, you can sign an NDA and learn a little bit more. But it's a good way to just kind of keep tabs on the market and what agencies are trying to sell for, you know, the metrics that they're looking at and things like that.

So I'd love to know more about that. Do you have links that you could email me with that or send it up to the school, to our marketing group website? Email me through that portal. That would be awesome.

Sure.

Yeah, I have a friend in Chicago. She sold her company, her branding company as well, and she didn't have any returning revenue. I mean, she didn't have that. She did have contracts, which I have. You know, the hope is that your contracts allow you to, you know, transfer the contract, you know, over to another whatever. So that's what she had. I don't know that she had— like, I've got some, you know, government contracts, which is a little different. I don't know if they're transferable or not. So that's just something to think about. Yeah.

Thanks, Ginger.

Thank you.