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If you're considering selling your digital marketing agency, I can help because I sold my digital marketing agency.
In 2012, I bought my first business. It was a WSI digital marketing franchise. The organization consisted of over 800 franchise owners worldwide. Within 5 years, my franchise ranked in the top 5% based on revenue production. My team was smaller than the other franchises, and we had better systems and automation, which means it was also one of the franchise organization's most profitable digital marketing agencies.
While I enjoyed the camaraderie of working and partnering with the other franchisees, I was ready to get away from paying the royalty fees. I sold my franchise in 2021, one year before I would have to renew my contract with WSI, and achieved a very healthy exit.
I enjoyed the process, and as you can see, I went on to become a Sacramento Business Broker.
Steps to selling a digital marketing agency
With the impact of the pandemic, digital marketing agencies have grown exponentially in recent years, revealing nearly a 22% increase in growth per year from 2018-2023*. While this industry continues to grow, now might be the perfect time to sell your business.
In this guide, we'll walk you through the essential steps to help you successfully navigate the process of selling your digital marketing agency. From understanding your company's value to finding the perfect buyer, here are six steps to selling your marketing agency for the best price.
1. Consider why you want to sell
Understanding why you want to sell your business is the first and most crucial step in selling. In my case, I was ready to do something new. The franchisor that I worked with required 10-year contracts. I was up for renewal, which meant signing up for another ten years.
Potential buyers will also want to know why you want to sell your business. You'll need to articulate your reason for selling and your post-sale plan.
To help you gain clarity on your goals and objectives from selling your business, start by asking yourself the following questions:
Are you ready to retire? And if so, what do you plan to do after retirement?
What are your needs and financial goals after the sale?
Are you looking to move on to a new venture?
Would you be interested in staying on as an employee after you sell?
Do you already have a succession or exit plan, or does one need to be created?
How do you plan to spend your time, and what do you want to do after you sell?
It's also important to have a timeline in place for both leading up to the sale and how you plan to transition after the sale. How much time do you need to get your business ready to sell? Do you plan to stay on to help transition the new owner? If so, for how long?
Creating a timeline and clearly understanding why you intend to sell is the foundation you'll need to begin the process of selling your marketing agency.
It took me almost a year from the day I decided to sell my digital marketing agency to the day the sale was finalized.
2. Understand the value of your company
We kept careful financial records. We used a spreadsheet to track the revenue and profitability of each client. This was very helpful when I was working with a business broker to understand the value of my digital marketing agency.
While financial documents are an intricate part of finding the value of your company, marketing agencies should also consider the following:
Do you have recurring revenue? This might be the single most valuable metric for digital marketing agencies.
What is the owner's role in the business? Would they be difficult to replace? The more dependent the company is on the owner, the more difficult it will be to sell.
What services does your agency offer, such as SEO content strategies, social media content, and email marketing?
Does your agency have a specific niche or industry it works with?
What unique selling propositions do you offer that set you apart from other marketing agencies?
What systems does your agency have in place that would be helpful during the transition phase (CRM, project management. SOPs, etc.)
Understanding the accurate value of your business can be a complex and time-consuming process. Consider working with a business broker who has experience in this process.
3. Prepare for the sale
The stronger your systems are for managing your agency, the more attractive it will be to prospective buyers.
A business broker will need documentation to determine your company's value, and potential buyers will be more interested if they see that a smooth transition of ownership is possible.
When preparing your marketing agency to sell, be sure to complete the following:
Focus on boosting profitability as much as you can in the coming months. This can include securing new long-term contracts or upselling your services to current clients.
Prepare or secure financial documents such as tax returns, balance sheets, and income and cash flow statements.
Gather other fundamental documents like lease agreements, real estate documents, employee contracts, and customer lists.
Document your processes and procedures. Include who performs day-to-day tasks, a sales playbook on how you generate leads, how operational tasks are completed, etc.
Remember, this due diligence process can be completed with the help of a trusted advisory team.
Stay focused on business development and adding new customers. We added a new customer with strong recurring revenue while we worked through the sale process. From the buyer's perspective, this showed that we had a strong team that could continue contributing to the agency's growth.
4. Create a Marketing Plan
Once you've identified why you want to sell, have the value of your business, and have a plan for how you'll prepare for the sale, it's time to start marketing. Your business broker should carry most of the load here, but being a marketer, you have a lot to offer when optimizing the marketing content.
Part of the marketing plan is to create a confidential business review (CBR). The CBR is essentially your first sales presentation to prospective buyers. While the business broker started the CBR, I ended up rewriting key portions to help improve the perception of our digital marketing agency.
Many businesses hit the market daily, so your listing and marketing efforts must stand out from the crowd. Luckily, marketing is an area you already have expertise in.
A few effective marketing strategies to consider when selling your agency include:
Understanding your buyer persona and who you want to sell your business to.
Working with a business broker who can use cold outreach to contact interested buyers.
Crafting a compelling listing and determining where to share it.
While marketing your business's sale can seem daunting, using the right strategies can set you up for success and give you a chance to maximize your profits.
5. Find Potential Buyers
Selling your business means parting ways with the company you worked to build. While you want to get the best price, you also want to be sure that your business finds the right buyer whose goals match what your digital marketing agency offers.
Confidentiality is essential when selling a digital marketing agency. You don't want your competitors, customers, or employees to find out about the sale until it is complete. Your business broker should require a signed NDA before they disclose the name of your business to anyone.
When searching for the right buyer and deciding who you want to sell your business to, be sure to think about the following:
Is selling your business to a family member an option or something you want to pursue?
Is there a partner or employee/manager that would have an interest in purchasing your business?
Would you consider selling your agency to a competitor who may be interested in your client lists or product offerings?
When a potential buyer is identified, what is their timeline for purchasing, and do they have any experience in the marketing industry?
Do you have the ability or interest to offer sell financing?
We had three competing offers for the purchase of our agency. Two of them were from contacts that the business broker sourced. One of them was a franchise owner that I provided to the broker.
6. Prepare for negotiations and the final stages of selling your business
Once you've identified the right buyer, it's time to negotiate and close the deal. This process can take longer than expected, but working with a broker and being prepared can help it go as smoothly as possible.
When you reach the negotiation and closing stage, here are a few factors to keep in mind:
Ensure you understand the reasoning behind your asking price to clearly articulate its value.
Ensure the timeline and other terms of the sale are advantageous for you before signing the purchase agreement.
Be prepared to provide financial and legal information during the due diligence process.
Have your closing documents ready for the big day, including corporate records, government and tax forms, and a bill of sale, among other forms.
Think about what you want to negotiate beyond the price of the business. Consider things like accounts receivable, transition time, and new customer acquisition.
Additionally, consider any post-closing fees you may need to charge the new buyer. When I sold my digital marketing agency, I negotiated a consulting fee, which was an hourly rate the buyer would pay when they needed my help beyond the transition period. I also negotiated a commission rate that the buyer would pay me to close the prospects in my pipeline after the sale was completed.
Are you thinking about selling your digital marketing agency?
Selling your digital marketing agency is complex, but following these steps can help you prepare for the journey ahead. Additionally, working with a business broker can help you alleviate the need to go it alone and help you earn the best price while you prepare for your next stage of life. Contact us today to start the selling process or help with assessing the value.
*According to IBIS World Digital Advertising in the U.S. Statistics.
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