You’ve run your agency for twenty-two years and have witnessed considerable gains since the day you started. Your client list has grown as have your employees.
But as the years have passed, you’ve found yourself working harder because, ultimately, the buck stops with you. You’ve been forced to spend more time on administrative and back-office matters. You finally protected your liquid assets by taking out professional liability insurance.
Experience has shown you how important it was to initiate non-compete agreements with your account team. And you got through the COVID pandemic by getting out of your expensive office lease and allowing your employees to work at home.
As if this wasn’t enough, you also got through your largest account, terminating a long-term relationship because new management had taken over and brought in its own preferred agency.
Whew! Time to catch your breath.
And suddenly, the clock has begun to spin so quickly that you’ve turned sixty and begun to hum that old Peggy Lee song: “is that all there is?”
You still have a long life ahead of you, and you begin to think about your future. Should you keep doing what you’re doing, or is there another option? Then you begin to think about the article in O’Dwyer’s written by Art Stevens who wrote about the other option: getting your agency acquired.
|This article is featured in O'Dwyer's May '23 PR Firm Rankings Magazine
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You ponder your future. Should you hang in for another five years? Should you sell the agency to key employees? Should you hang on for another five years? Is selling the agency in your best interest? Let’s look at each of these three options.
Let’s start with hanging in for another five years. The pluses are still worth considering. You get to run your business yourself with no interference from anyone. You can continue to grow your agency as you see fit. And in five years, you can begin to think of other options. But what if your workload continues to grow? And what if the economy tanks in five years, leaving you with decisions such as how best to downsize, terminate employees and adjust to being a smaller agency? And this means you’re now working even harder to bring in new clients, thus extending your workdays. Plus, you’re spending less time with your grandkids, spending less time taking vacations and sacrificing other items on your bucket list. And in five years you’ll be sixty-five.
So, what about selling your agency to key employees, which would enable you to get to your bucket list a lot sooner? You’re fortunate that you have some highly capable number-two people and would definitely entrust the future of the firm to them. But the downside of this option is that you would have to sell the firm at a far lower purchase price to employees than what you would receive in the PR agency marketplace. You discover this very quickly by doing the necessary research.
Another downside is the fact that not all key employees are cut out to be entrepreneurs. It’s a decided risk and additional responsibility to own and run an agency than being a senior executive at one. Consider yourself fortunate that you were willing to be an entrepreneur at a younger age than many agency executives are willing.
Which leads to the third option: selling your agency. But let’s start with the downsides. If you decide to sell your agency, you will have to report to someone at the buyer’s organization. And you haven’t reported to anyone—other than your clients—in many years. You’re used to being your own boss, which is why you started your agency in the first place.
And because you understood that being in business allows you to run it profitably as its primary beneficiary. If you ran it well, you personally took home a lot of money which is the primary reward of running your own business. So, if you sell your business you’d need to agree to a transaction that allows you to make even more money.
Another downside consideration is that you wouldn’t be able to just leave your agency on the day the deal closes. Most likely, you would have to agree to an earnout of two, three or four years.
But the advantages to selling are many. With the right buyer, your employees will have an even greater opportunity to grow. They would have security too, because your agency would now be guaranteed to have a long life. And if the cultural fit is right, they would become part of a collaborative culture with a great emphasis on quality of life.
Moreover, if you choose the right buyer, you will spend the rest of your career in a cultural fit that will make life more comfortable and motivating. The admin and back office drudgery would be taken off your plate, allowing you to spend more time on business development and quality of service.
Your key employees will be rewarded with incentives and greater career opportunities. And you’ll be able to see your grandkids more often. I know whereof I speak. Before I began to focus on helping PR agency founders and CEOs sell their agencies, I, too, founded and sold my agency. And since then, I’ve helped sell other agencies for some seventeen years.
Given my background and experience, I can honestly say that the best option of all for PR agency founders is to sell their agencies to a willing buyer: other agencies, private equity firms and other organizations that value the increasing value of public relations and the agencies who guide it.
Art Stevens is Managing Partner of The Stevens Group.
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