Many people don’t realize how long it may take to sell their business. Several elements have to work together to achieve a successful sale for your marketing or advertising agency.
The selling process can be strenuous, with lots of time and effort to be put into it. Are you unsure where to start your sales process? Clare Advisors can help you every step along the way and explain why you should plan for your business sale years in advance.
Would you like sales assistance from an M&A advising team? Contact Clare Advisors today to start the process.
How Long Does It Normally Take To Sell A Business?
Although each deal is different, a typical earnout takes between three to five years in the advertising and marketing industry. Varying factors can prolong or shorten the process of the sale, but depending on the type of sale process, it may take as long as a year to move through a full sale process.
What Is Your Role After The Sale?
Many business owners do not realize how much time they will still have to dedicate to their agency after they sell it. A buyer will often expect leadership to stay with the agency for an agreed upon period to ensure a successful transition – operationally, financially, and culturally.
Additionally, while some agency owners play an integral role in every client project, others may delegate most (if not all) of the client work to their team. Since buyers generally don’t want to see an agency that has the owner heavily involved with every client, it is best to have a senior team in place to handle a lot of client and day-to-day work. Depending on the agency owner’s relationships with the clients, a buyer will want to ensure clients do not leave as soon as the seller does.
To help combat that possibility, it’s important to establish clearly defined procedures of operations and sales within your agency. Your employees should be using processes for onboarding clients, billing clients, time-tracking, expense-tracking, etc. Your team should be able to continue doing exactly what they are now once the agency is acquired and you eventually exit.
Each buyer is different, and while there is a chance that a buyer may not require leadership to stay for three to five years post-closing, it is still ideal to ensure the agency can run successfully once you have left or switched to a more limited, consulting role.
Why Should You Plan Years In Advance?
Realistically, if you are considering completely exiting your agency in, for example, the next eight years, you should subtract approximately five years from that timeline for your post-closing employment / consultancy period. This leaves you with three years to prepare for a sale and move through the sale process, before starting your earnout.
Ideally, it would be best to sell your firm when it has the most revenue and profitability momentum. Selling your company when it is expected to grow is more attractive to a buyer than a company that is stagnant or declining.
What Kind Of Sale Should You Do?
Something to consider is the type of sale process you would like to use. In the traditional sale process, your M&A advisor contacts up to 30 (or more) potential buyers for the company. The traditional process is highly structured and can take up to 12 months.
In a limited sale process, your M&A advisor talks with five to ten potential buyers. This still fosters competition, but it is not as structured and does not require as many resources on your end as a traditional process would.
Lastly, you could choose an exclusive negotiation sale process. It is highly customized and tends to be used when the seller already has an established relationship with the buyer. This process can take a significantly shorter amount of time than the other sale processes.
What Should You Do To Prepare For The Sale?
As stated previously, having established procedures is important for a smooth transition post-closing. Some ways to help prepare for the transition include:
- Establishing your team: You want to have an established senior team that handles most of the day-to-day work and can handle any problems that may arise. Additionally, you may want to establish relationships with a law firm and M&A firm in your preparation to sell.
- Organizing your finances: Having accurate and accessible historical financials is essential for assessing the value of your agency and smoothing the transition process when it is time for your M&A advisor to analyze your financials and during due diligence.
- Integrating your operations: Establishing your procedures will ensure that everyone on your team knows what to do and when. A buyer will want to see a well-functioning team that does not need the owner’s say on daily work.
In every M&A transaction, a buyer will perform some level of due diligence, where the seller typically pulls together all of his/her necessary records and information. From an efficiency standpoint, it is better for both parties if the seller already has an organized system in place and can easily retrieve information regarding the business.
An additional benefit to knowing where to obtain all information is that the owner can hide most of the sales process from the employees. Often, employees are typically not informed about the acquisition until the very end of the transaction. So, it’s always better to set up these efficient processes sooner rather than later.
Be Prepared For the Emotional Process
Selling your agency is often an emotional experience. Unless a business owner intends to run their agency until they retire, they should have a general idea of when they want to sell and how they will go about it.
If you have had time to decide on selling and its implications, the eventual sales process will be easier to go through. Additionally, no longer being in an ownership or CEO role will be an easier pill to swallow if that has been a plan or goal for a while.
A seller should also be sure that they definitively want to sell their agency before they hire an M&A advisor and put an advisory team in place for the sale process. It would not be beneficial for either party if the agency owner changed his/her mind halfway through the transaction process. Lawyers and the contract negotiation process are not cheap and by the time contract negotiations come about, both parties have invested time, money, and energy into the transaction.
M&A Services For Your Business Sale
The best time to reach out to an M&A advisory firm is when you’re beginning to consider selling your agency. From there, you can get expert advice on how to prepare for a sale and the best way to go about it.
Clare Advisors is an M&A advisor with decades of experience in mergers and acquisitions in the marketing and advertising industry. The Clare Advisors team provides M&A advisory services before you begin the sale process and through every phase of the sale. With our service-oriented boutique mergers and acquisitions advisor team informing, guiding, and assisting you, the sell-side M&A process becomes easier and more effective for getting the results you hope to achieve.
Are you searching for an M&A advisor to help sell your agency? If so, contact Clare Advisors for exceptional sell-side advisory services.