Buying an agency should be part of your growth strategy
The idea of buying an agency can be scary, but it’s also exciting. It can be an effective part of a growth strategy for some agencies, but not all and depends on what needs you have at the time and where the agency is planning to go in the future. To increase any agency value should include experience of buying or selling a business.
Buying an agency is a big deal. It’s a significant financial commitment and a big decision for the business and the agency, for the people involved, and for your Clients.
From our experience, here are some things to consider:
1. Understand your current situation
A relatively easy first step, what areas does the agency need strengthening – skills, capabilities, leadership, sector expertise, location, access new clients, new business success etc.
2. Be clear about the benefits and challenges of buying another agency.
For example, new Clients – If you’re an agency that does not currently have the capacity to service a certain type of Client, buying another agency can be a way to gain that expertise such as help with content marketing or social media. Buying out a smaller agency could be an option. In doing so, you’ll gain access to their existing client list and expertise in this area (and possibly even expand upon it).
3. Talk to advisors, who can help with questions like, “Are we ready for this?”
As you are thinking about buying an agency, there are a few things to consider. First, talk to your advisors who can help with questions like “Are we ready for this?” and “What does it mean for our agency?.” This could be your accountant or an M&A consultant depending on how complex your situation is. It could also be someone who has done this successfully or unsuccessfully in the past and should be invited as an non-executive to the agency.
Secondly, talk to people in our agency who have bought agencies before and learn from their experience: what worked well? What didn’t go so well? How did they overcome challenges that came up after they purchased their first agency (or second)?
4. Research other agency acquisitions – look at both successful and unsuccessful examples.
Look at what they did well, and what they didn’t do so well. Make sure you have a plan for the future of the agency, even if that means looking at an exit strategy down the road. You want to make sure that integrating your new agency into your business will be as seamless as possible, whether it’s through training or simply having open lines of communication between employees so everyone knows who does what (and why).
5. Assess your financial health and growth plans.
If you’re looking for an agency because it’s a good fit for your reputation, or if you have plans to grow the business soon, then it’s important to assess both parties’ financial health. Make sure you can afford the price tag of buying an agency before entering into negotiations with them. In addition, ask how they plan on growing their team and expanding their services in order to accommodate whatever new projects come along.
6. Understand how it works and how quickly you can integrate into an agency you acquire.
First, understand the business model and how it works: Who are the key people involved? What do they do? How does their work fit into the overall strategy and vision of your agency? What is the culture like at this agency–and will it mesh with yours? Second, take stock of all technologies currently being used by this company, including software platforms, marketing automation systems (like HubSpot), CRM applications (like Salesforce), project management tools (such as Asana) or others that may not be immediately obvious but are critical components of their work flow processes.
Thirdly, get familiar with any clients who have been acquired by this particular firm in hopes that they’ll continue working together after acquisition day arrives!
Sounds a lot we know, but the returns can extremely high and boost your agency value multiple by 50%.