The Agency Owner Journey - Stage 2

Be fully prepared for growing your agency, planning your exit and ultimately selling the firm.

This is the third in our three-part series on preparing for the crucial stages of agency ownership including:

1. Planning and effectively executing for growth.

2. Building a saleable asset and maximizing its sale value.

3. Leaving the agency on your timeline.

Achieving successful outcomes for each of these stages comes down to readiness. Is your agency ready to achieve ongoing growth and become a magnet for quality buyers? Prosper Group can help at every step along the way.

You can review the previous mailings by clicking here for Stage 1 and here for Stage 3.

Here, the topic is Stage 2 - Building a saleable asset and maximizing its sale value.

There are four different options for monetizing your agency. Which one is right for you? 

1. External sale – The sales price is earned over time and usually includes an earn-out for the seller. With a private equity buyer, it’s common for part of the purchase price to be paid upfront followed by a rollover and second deal.

2. Internal sale – This is most often a sale to your senior team or a successor. It takes longer than an external sale to receive the proceeds. However, the owner remains in control of the agency and decision making until paid in full.

3. Passive ownership – This is potentially the most lucrative option for owners. Key leaders are sold some level of equity while the owner retains a significant amount. Among other benefits, this approach allows the owner to maintain control in case an external buyer makes an offer you can’t refuse.

4. Roll-ups and IPO – In this option, several independent agencies band together for a future sale. Each agency continues to be run independently and keeps most of its profit while paying a management fee to a leadership structure. The goal is to execute a larger-scale sale over time via an IPO.

For more details on each of these options plus other important information, click here.

Understanding and effectively executing what buyers are looking for allows you to pursue whichever option you choose.

There are nine important fundamentals to prospective buyers. These tangible and intangible factors are:

1. Mission (Why does your firm exist? Why should prospects and talent care?)

2. Vision (Where will you be in 5 years? How will you get there?)

3. Brand (Compelling positioning, service offerings, delivering superior results)

4. Leadership (Depth of team and level of reliance on owner for success)

5. Structure (Is each team/function structured effectively and assigned adequate resources?)

6. Methodology (How you deliver superior results for clients, high value IP).

7. Business Development (How are leads generated? How are they pitched and won?)

8. Culture (Health of firm and team alignment around mission, vision and values)

9. Finance & Operations (Revenue growth, profitability and level of sophistication)

We call these your Growth Drivers. Prosper Group’s Growth Driver Audit is our proven, proprietary process for helping agency owners objectively assess their agency’s performance and then improve it where needed. The more effectively the agency performs on each factor as perceived by buyers, the higher the sale value will be.

To learn more about each Growth Driver, click here.

Value Buyers vs. Strategic Buyers. You need to know the difference.

Value Buyers are generally larger independent agencies without financial backing from an outside bank or PE firm. They typically look to acquire smaller agencies (and will consider lower EBITDA). These buyers may be the only opportunity to sell for agencies under $3M in revenue and lower profits. 

Conversely, Strategic Buyers (which include most private equity firms) generally pursue larger acquisition targets at $10M+ in revenue with solid profitability that they feel can scale revenue dramatically over a five-year or shorter period.

To learn more about Value Buyers vs. Strategic Buyers, click here.

Prosper Group is different.

We work only with the owners of independent marketing and communications agencies.

In the past four years, we have been involved in more than 25 M&A transactions. These include external sales, internal sales and passive ownership.

To access our thinking on a variety of other topics of interest to agency owners, click here.

We’re here to help you prosper.

Prosper Group exists to help the owners of independent marketing and 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.