Rick Gould, managing partner at merger and acquisitions specialist Gould+Partners, tells Doug Simon some effective ways to build your agency’s value in the latest “PR’s Top Pros Talk” video interview.
His number-one tip: Run your business as if you're going to sell it. “You should run it to maximize the bottom line,” Gould says.
“When a prospective buyer is looking at your firm, they're looking at profitability, they're looking at what kind of return on investment they're going to get,” he tells Simon.
But Gould says that scrimping on your own salary to boost the bottom line may not be an optimal strategy. “What you should be taking is a market salary, because most people don't realize this, but when we value a firm, we normalize the owner’s salary. So if an owner is taking fifty thousand a year, but the normal salary is two hundred, we value it as if you're taking two hundred.”
Another pivotal factor: “Have a really good number two. Have that person that could step in for you.” A buyer, he says, is going to want to be sure that there’s someone there to keep clients happy after the owner has been fully bought out.
Also, sellers should give their post-earn-out plans careful consideration—since according to Gould, that is what the buyer will be doing. “The buyer will be asking, almost immediately, what do you want to do after you've fully paid off? You have to be ready for that.”
How much money will a seller get up front? “Typically on a sale, the seller will get twenty five to thirty five percent of today's valuation at closing,” Gould tells Simon. “It all depends on the profitability of your firm and the profile of the firm, and it's in negotiation.”
What happens to staffers after a sale? “Buyers rarely, if ever, will let people go unless you, the CEO of the seller firm, feel certain people should go,” Gould says. “So it will be totally up to you who stays, who goes, and usually everyone stays.”
But the main principle sellers should follow, he says, is patience. “If you want to sell, you want to sell to the right buyer. You'll be living with them. You want to like them. You want the culture to be perfect. That's more important than the money.”
Interested in taking part? Contact Doug Simon at [email protected]