Getting Ready to Sell Your Agency
Part 2 in Maximizing the Sale Value of Your Agency
If you’re thinking about selling your agency, don’t jump the gun. Maximize its value by being smart, patient and prepared.
This is the second of two in-depth pieces on this critically important subject. In the first piece, we provided our thoughts on:
1. How buyers define value from their perspective.
2. Paths for monetizing value.
3. The different types of buyers.
To review our thinking on these three factors, click here.
Today, we will discuss the fourth area which agency owners need to clearly understand in order to prepare for selling their firm: The criteria which affect agency value.
How we know what we know.
We’re deeply experienced in helping agency owners secure the best result when selling their firms. In 2022 alone, we have been involved in 21 M&A transactions.
We are sale/exit path agnostic. Prosper Group’s unbending commitment is doing what’s best for the owner, not simply to generating a fee.
Nine fundamentals which affect agency growth and value.
These are the basics of your business. Each of these nine factors will be closely assessed by potential buyers because they have a significant effect on your ability to attract and retain top talent, grow your firm, consistently drive above-average revenue and profit and be successful over time.
For agency owners, how well you execute these will determine whether you’ll be able to command a premium selling price for your firm.
The nine fundamentals are:
Prosper Group -- Growth Driver Audit 9-Point Diagram -- Dec. 15, 2022
We call these your Growth Drivers. For each one, here are our thoughts on how to assess your agency’s performance, improve it where needed and increase your perceived sale value to buyers.
Growth Driver #1: MISSION.
For each Growth Driver, we’ll provide 1) the key questions you need to ask about your firm, 2) growth indicators which will tell you how well the agency is performing in this particular area and 3) the signs of a healthy agency.
So, starting with your Mission:
Key questions:
- Do you have a specific and articulated Mission? What is your WHY?
- Why should prospective clients care you exist?
- Why should talent dedicate their careers to your agency?
Growth indicators:
- You have a soaring statement of why the firm exists. (For a healthcare agency, this could be “We are here to help eradicate cancer from the planet.”)
- Your agency is a magnet for both talent and clients.
- Your Mission is helping to differentiate you in the marketplace.
Signs of a healthy agency:
- Your Mission is compelling and likely to attract talent, clients and (ultimately) potential buyers.
- It’s consistently referenced throughout your marketing materials and across all platforms.
- It is also clearly understood and creates excitement throughout the agency.
Growth Driver #2: VISION.
Key questions:
- What is the agency’s vision for the future?
- Is the agency prepared to realize that vision?
Growth indicators:
- You can answer where the agency is going and how you’re getting there.
- You have identified opportunities and challenges with the steps needed to address each.
- You have a strategic plan that guides decisions on investment and talent.
- The plan also identifies roles/accountabilities for core agency functions and senior leaders.
- This plan is a written document which is reviewed at least twice each year.
Signs of a healthy agency:
- The agency’s Vision and strategic plan are in writing.
- The Vision includes measurable success metrics.
- Both the Vision and plan are widely shared and understood.
- Progress is reviewed periodically.
- Your team is aligned around Mission, Vision, Plan and Values.
Growth Driver #3: BRAND PROPOSITION.
Key questions:
- What does your firm do better than all others?
- How are you differentiated in the marketplace?
Growth indicators:
- Your agency’s brand is distinctive and memorable.
- Your positioning is clear and competitively differentiated.
- The agency is laser-focused on the industries being served.
- The service offerings are compelling and contemporary.
- Both your IP and methodology further differentiate the firm from competitors.
Signs of a healthy agency:
- Single-minded focus on who you serve, how you deliver results and what you do.
- The quality of your client roster. Does it include blue chip accounts?
- The length and depth of client engagements.
- A steady flow of quality leads.
- Contemporary service offerings.
- Intellectual property and products that demonstrate deep knowledge of target categories.
Growth Driver #4: LEADERSHIP.
Key questions:
- Is the responsibility for growth adequately shared by a capable leadership team?
- How will the agency’s leadership team transition to the next generation of leadership?
Growth indicators:
- Shared accountability for client service, business development, people management and administration.
- Clear roles and responsibilities.
Signs of a healthy agency:
- The agency isn’t reliant on the owner for winning and servicing business.
- Each core business function and revenue stream has assigned leadership with adequate resources.
- Each leader is aligned around the company’s Vision, Mission, Plan and Values.
- Each leader also understands his/her role and accountabilities.
Growth Driver #5: ORGANIZATIONAL STRUCTURE.
Key questions:
- Is your business organized to deliver efficiently on the Brand Proposition?
- Are essential supporting functions in place?
- Is the agency delivering true integration seamlessly?
Growth indicators:
- Having a structure that concentrates related knowledge and expertise.
- Finance and administrative functions are effectively integrated into the business.
- Ownership is in a position to support the efforts of others to grow the agency.
- Each leader in client service understands how to work together to deliver integration.
Signs of a healthy agency:
- CEO is supporting the organization’s efforts and not the other way around.
- CEO is helping others to drive the agency’s growth and success.
- The organization is built around knowledge centers.
- Each revenue stream and core function leader is assigned adequate resources for success.
Growth Driver #6: METHODOLOGY.
Key questions:
- How does your agency generate consistently better results than your competitors?
- How do you ensure quality control as the agency gets larger?
- How does the firm drive integration for clients?
- How do you avoid the chaos so often associated with rapid growth?
- Is the agency actively growing the next generation of leadership?
Growth indicators:
- A branded methodology for overall client service delivery. (The agency’s Mission is your WHY. This methodology is your HOW.)
- Branded products and sub-processes that further differentiate you.
- Consistent marketing and new business processes.
- Standard financial management process.
- Everything is taught to the next generation (to avoid the limitations of tribal knowledge).
Signs of a healthy agency:
- You have an articulated secret sauce for how you get results.
- Proprietary products and processes that demonstrate deep knowledge and can be sold at a premium.
- A professional development program built around your secret sauce and proprietary products.
- Consistently used sales process which your team understands and reinforces why the agency regularly wins new accounts.
Growth Driver #7: BUSINESS DEVELOPMENT/SALES & MARKETING.
Key questions:
- Who is responsible and accountable for building the agency’s reputation and developing business?
- Are you regularly winning high quality and profitable new accounts?
- Are you winning business that supports the firm’s Vision, Mission, Plan and Values?
Growth indicators:
- Dedicated and proactive sales and marketing function.
- Written marketing plan for which the leader is held accountable.
- Robust and actively managed prospect database.
- Uniform sales process applied across all teams and practices.
- Sales process has second-tier leadership developing first drafts of programs/proposals.
Signs of a healthy agency:
- Consistent marketing leadership, resources and effort are in place.
- There is a defined sales process.
- New business targets are clearly identified.
- The process includes pursuit of dream prospects on a proactive vs. reactive basis.
- There is also a defined process for developing organic client growth and enhancing client satisfaction with the firm.
- The leadership team is even more important than the owner in generating leads and wins.
Growth Driver #8: CULTURE.
Key questions:
- What is it like to work at your agency?
- How are major decisions made and communicated?
- Are you committed to and investing in building a leadership pipeline?
Growth indicators:
- Agency values are formalized and articulated.
- Leadership reflects the values of the agency.
- Staff have clear paths for development and the support needed to achieve them.
- Formalized professional development, reviews and promotion process.
- Employee needs are being met. Employees feel inspired, engaged and satisfied.
Signs of a healthy agency:
- Defined values that govern how clients and agency team will treat one another.
- Decisions are consistent with values and predictable by staff.
- Expectations and incentives are known throughout the firm.
- Low attrition rate.
- Formal corporate governance process.
- The internal business of the business is as important as client service.
- Defined professional development program to build leaders.
- Clear commitment to and focus upon Diversity, Equity and Inclusion in how the agency manages itself and also how it presents itself to clients.
Growth Driver #9: FINANCE & OPERATIONS.
Key questions:
- Are revenue and profit performance consistently at or above industry standard?
- Are systems and controls in place to manage the business profitably?
Growth indicators:
- Meeting performance targets with 50/25/25 financial model. (Contact us to learn more.)
- Agency earns premium pricing for its services.
- Proactive vs. reactive management reports.
- Leaders are capable of and accountable for managing for profitability.
Signs of a healthy agency:
- Consistent revenue growth over time.
- Consistent profit and cash flow.
- CFO is integrated into the agency’s business.
- Finance group provides client leaders with timely information.
Summary – The signs of being a healthy, high-value agency in the eyes of potential buyers.
These include:
1. Team is aligned around Mission, Vision, Values and Plan.
2. Clear, meaningful and differentiated Brand Proposition.
3. Deep second-tier leadership team.
4. Alignment on roles and expectations.
5. Agency is structured around knowledge and expertise.
6. Process for delivering results and productization.
7. Dedicated marketing function that drives leads.
8. Consistent sales process.
9. Commitment to values, training staff and DEI.
10. Increasing revenue and consistent profit.
11. Sustainable work/life balance for everyone.
Additionally, in top-performing firms, responsibility and accountability for growth are spread throughout the management team. Further, the CEO is supporting the efforts of others rather than the agency supporting the CEO.
Agency owners must always remember that it is the buyer’s perception of their firm that determines its value, not their own. The more effectively the agency performs on each of these indicators - and is also perceived by buyers to be doing that - the higher the sale value will be.
We can help your agency improve performance in each of these areas to increase its sale value. Here’s how.
Prosper Group’s Growth Drive Audit is our proven, proprietary methodology for helping agencies become more successful and increase their market value. It will identify areas for improvement and provide insights which will help put your firm into the best possible shape for a sale.
We carefully examine your growth drivers (the key indicators to potential buyers), evaluate the agency’s performance on each and provide specific recommendations for improvement where needed (including how to improve). Our process typically takes 4-6 weeks.
We’ve found that agencies for which we’ve conducted Growth Driver Audits and follow our recommendations outperform the market by up to 25% in revenue growth and profitability.
Please contact us at any time to discuss a Growth Driver Audit for your firm. You can also click here to learn more about the Growth Driver Audit now.
To also access our in-depth thinking on a wide range of other topics of interest to agency owners, click here.
We’re here to help you succeed.
Prosper Group exists to help the owners of independent marketing communications agencies achieve their ambitions and maximize the value of their life's work.
Our team of former agency leaders and owners focus their deep experience on implementing proven proprietary methodologies across our three practices of agency performance, owner exit planning and M&A transactions in order to drive owner and agency success.
To learn more about us, please visit our Services page
