Do you, as the owner of an agency, find yourself struggling to keep up with all your financials and business planning? Many smaller agencies may need financial and organizational guidance as they aim to grow their business and sell their company. A financial advisor can help position them for greater success in a sale transaction. For strategic growth, boutique M&A firms like Clare Advisors can work with owners and management teams in any of the following capacities.
Trying to find the right CFO services? Reach out to Clare Advisors for help with all your financial planning.
Financial Planning and Analysis
Financial planning can be used to assist business owners in preparation for a sale transaction. Whether you anticipate selling in the next 12 months or the next seven years, you can start your financial planning now. Furthermore, an M&A professional can help you meaningfully analyze your financial and operational efficiencies.
In fact, a consultant can assist you in the months or years before you sell. Whether they help you correct inefficiencies or help you implement plans to reduce revenue concentration, their goal is to help you increase your company’s profitability. With their advice, you may also be able to increase revenue growth and your company’s scalability.
Growth Management Advice
M&A firms like Clare Advisors can provide advice on how to best manage the growth of your business in the advertising and marketing industry depending on your agency’s unique needs.
One service you might consider is having monthly meetings with your advisor. During these meetings, you can discuss the financial direction your agency is heading in. Once you understand where you are and where you want to be regarding your financials, operations, and management, your advisor can help you determine how to get there.
By having regular meetings, you can stay on top of your agency’s financial status and make informed decisions along the way. This type of systematic growth management prevents your agency’s growth from racing ahead of your resources, stagnating, or even declining. Instead, you have the insights you need to build a stronger agency. Thus, you can manage your growth as you go.
In addition to assisting you in monitoring and evaluating your agency’s growth, an M&A advisor can also discuss ways to improve both your profitability and your revenue growth. With this type of expert advice, you can make sure-footed plans and advance confidently toward your goals.
Hiring and Operations Consultation
M&A services go beyond discussing the numbers of financial health. For example, an M&A firm can help you decide when you should be making decisions about hiring and operational management.
Hiring can be an expensive and time-consuming process. You want to consider hiring more people when you feel your agency’s growth and/or new client work will not be sustained by the current number of employees. If you are looking to eventually exit the agency, you may want an experienced and functioning senior team in place to handle most of the work. Many buyers want to see owners that do not have to participate in every single aspect of client work in order to keep the agency functional. Consider starting to hire or promote people until you have a senior management team that can take on more responsibilities within the agency.
Help with Evaluating Operations
Operational metrics are essential in determining where your agency stands. With a financial advisor assisting you, you can gain more value from these statistics. Your advisor can explain how to draw the right conclusions from them.
Some of the metrics your financial advisor can help you with include the following:
- Revenue/Salary Ratio: This key performance indicator shows how much of your revenue goes to salaries / compensation. An M&A advisor can tell you what the typical revenue/salary ratio should be for an agency like yours. This can vary based on how profitable your agency is, the services you provide, and how many key employees you have.
- Profit Margin: Profit margins are a common method to evaluate financials, as they gauge the degree to which your agency actually makes money. Your advisor can discuss where you want your profit margin to be going forward. In a sale transaction, buyers want to see historical growth, as well as increasing profitability.
- Revenue Growth Over a Specified Period: The revenue growth over a specified period can give you insight that you can use for business planning, financials, and more. Your financial advisor can use this number to help you control your growth or present your business in the best light.
Detailed Monthly Reports
Along with the financial planning services M&A firms like Clare Advisors offer, they can produce and walk you through a detailed monthly report. This report may include a variety of financial statements and analyses to show you exactly how well your agency did during that month and year-to-date. These reports are helpful whether you are trying to increase your revenue growth, decrease your revenue concentration, or want to see how the current YTD financials compare to the prior year’s financials. Components of this type of comprehensive report may include any or all of the following.
- Profit and Loss Statement: With a P&L statement, you can see what percentage of revenue goes to, for example, Cost of Goods Sold (COGS) or compensation. The P&L statement also shows your EBITDA (earnings before interest, taxes, depreciation, and amortization), your profit margin, and your net income. This financial statement reveals a lot about your company’s financial position.
- Comparisons with Other Agencies: Your advisor may include a section covering comparisons in your report. With this information, you will know how your agency is doing compared to a typical agency or a highly profitable agency.
- Balance Sheet: A balance sheet is like a snapshot of your agency’s financial wellbeing at a point in time. It shows your agency’s assets and liabilities, as well as the shareholder’s / owner’s equity.
- Cash Forecast: Determining your expected cash flow helps you plan your financial transactions, somewhat like a budget. The cash flow forecast shows your projected income and expenses. Your financial advisor can prepare the forecast for you and guide you in making any decisions related to it.
- Client Concentration: Monthly reports on your client concentration can help you understand how much of your revenue comes from a select number of clients. Generally speaking, if a few of your clients generate most of your revenue, you risk losing most of your agency’s gross income if one or two decide to no longer work with you. You and your advisor can discuss what type of revenue concentration a buyer would find risky.
- Utilization Reporting: Your financial advisor can also present monthly utilization reports that can give you a better understanding of your billable utilization rates. Billable hours are particularly important in business service industries as they show you how many of your employees’ hours are spent directly on client work, which in turn reveals how many hours you can invoice your clients.
Clare Advisors is a merger and acquisition and financial advisory firm. With founder John C. Burns III at the helm, the firm has completed many buy-side and sell-side M&A transactions. The Clare Advisors team has provided exceptional financial advisory services to agencies across the United States and is committed to helping companies reach their highest potential.
Are you looking for the best financial advisor for your marketing or advertising agency? Contact Clare Advisors today for a consultation.