Is It Smart to Sell Your Digital Marketing Company Now?
The digital marketing industry has been growing exponentially in the last few years. Statistics report that between the years 2015 to 2020, the average growth rate was around an impressive 13%. If you own a digital marketing agency, the company is likely making good profits. If you’ve been considering a sale, now would be a great time. Finding a buyer for the acquisition won’t be difficult, considering that the industry is projected to grow even faster in the coming years. Here are some of the key indicators that your agency is ready for sale.
1. You’re Set for the Next Challenging Project
Entrepreneurs typically devote close to 10 years of their lives to set up a venture. Most small businesses take around two to three years to start making profits. Typically, it takes another seven to ten years for the company to become self-sufficient and successful. Chances are that by the time the agency is raking in the profits, you’re ready with your next product idea, one that will take up all of your time and energy.
Many startup owners also choose to designate a part of the sales proceeds toward setting up a new venture. If you’re ready with a brand new concept, it’s time to look for a bid.
2. The Company is Highly Profitable
Selling a digital marketing company involves different dynamics compared to other businesses. Buyers looking to acquire an agency consider both the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) multipliers and net profit margins.
These figures give them an accurate estimate of how much the company is actually worth. Experts suggest that your agency would have to show margins of at least 17% to attract purchase offers. Once balance sheets show high profits, that’s the right time to invite bids.
It’s also worth bragging a little if you stand out from the competition. For example, if you’re in an industry that’s known for being financially risky, use the records from your high-risk payment processor to show that you’re reliable and suffer few chargebacks from customers.
3. Other Factors Indicate that the Company is a Good Buy
Buyers often look to other factors that indicate the success of a company. For instance, Intellectual Property (IP), growth in revenue over the last few years, and the number of employees working in the agency. An essential deciding factor for a digital marketing company is, undoubtedly, geographic diversification. That’s because technology makes it possible for IT companies to serve customers in remote locations. Furthermore, potential acquirers are keenly interested in what you’ve been doing to make the company self-reliant and keep operational costs low.
4. You’re Getting Inquiries from Prospective Buyers
When you start getting inquiries from interested acquirers, you’ll know the company is making waves, and it’s time to consider a sale. Agency buyers will likely get in touch with the owner for more detailed information. You’ll respond with concise but accurate answers so they can assess your company’s worth. However, expert brokers have cautionary advice to folks who ask, “What is the best way to sell my company?” They warn against revealing sensitive information until a confidentiality agreement has been signed. Of course, you’ll also take the time to check and ensure that the buyers are legitimate and are genuinely interested in a purchase.
5. You’re Ready with a Precise Evaluation of the Company’s Worth
Every entrepreneur should assess their agency’s value from time to time. This information can be leveraged for a better deal. Having answered initial questions from acquirers, you’ll receive a Letter of Intent (LoI) that outlines their proposal and offer. If you agree with their evaluation, further steps for finalizing the sale can proceed.
The deal is complete only after the documents have been signed and registered. Make sure that all of your questions and concerns have been addressed before you hit this final step–the process that can happen in minutes with an online notary. Alternatively, you can hold off and start negotiations for better terms. Explore the offers that you’ve received and find out more about how buyers arrived at their estimated values. When you have all the relevant numbers about the company’s worth, that’s when it’s time for a sale.
6. You Have an Advertising Strategy
If you hope to sell the company for its real value, an effective advertising campaign is critical. Your digital marketing business is likely vying for attention in a highly competitive sphere. Use strategies like press market releases, paid media ads, email campaigns, and click-funnel marketing, among others.
You could also try direct marketing by getting in touch with known acquirers in the industry who have bought out similar businesses in the past. Of course, before going public to invite bids, you’ll ensure that all customers, vendors, investors, and other stakeholders have been informed and are on board with the decision for a sale.
7. You’ve Vetted Suitable Buyers
Having spent a decade of your life establishing the company, it’s understandable that you want to hand it over to suitable buyers with the necessary industry experience. You’ll also want to confirm that they are qualified to purchase and manage the company and that their ownership style is an ideal fit for the organization. You’re ready to sell the company when the due diligence process is complete.
Here’s where the assistance of expert brokers is valuable. That’s because as long as they’re vetting a particular buyer, sellers cannot discuss a possible deal with other bidders. Speeding up the decision-making process is essential to not miss out on other, more viable offers.
8. You Have an Impressive Portfolio of Clients
Acquirers are highly interested in buying out companies that have a portfolio of high-profile clients. At the same time, they would like to see the agency also working with smaller clients from different industries making up a diversified clientele. When you’re confident that you’ll be getting favorable reviews and testimonials from the businesses you work with and that you have a robust reputation in the industry, that’s the right time to sell the company. Considering that digital marketing services are an ongoing process, you’d also want to show that the company has current and upcoming projects lined up for a long-term revenue stream.
9. The Agency Has a USP
Any company with a USP that gives it an edge over the competition is always in high demand and sells for a higher value. This USP could be a unique technology or a specific service that only your company offers, whether niche-related or for a particular customer base. Being established as an industry leader within a particular area makes the digital marketing agency more popular with acquirers.
Every company owner has a window of opportunity when they’re getting profitable offers, and the time is right to accept a bid. Waiting too long to sell or making a premature sale could result in your not getting the optimum value for the time and sweat equity you invested in the venture. When the window opens up, snap up the right deal, and make a well-executed exit.