The #1 Digital Agency Podcast for Social Media, SEO, PPC & Creative Agencies

Considering buying or selling your digital agency? Acquiring another agency is an excellent growth strategy and it’s might be easier and less expensive than you might think. An acquisition can help improve profit margins, expand your client base, and inherit a skilled team while eliminating the competition. An agency acquisition is worth exploring if you're interested in rapid growth.

In this episode, we’ll cover:

  • Do you need to be a big agency in order to buy one?
  • Do you need a lot of cash to buy another agency?
  • How to structure an agency acquisition.
  • The 4 criteria of a good agency to acquire.

Today’s podcast guest is Brook Schaaf, co-founder, and CEO of FMTC, an agency dedicated to helping advertisers and merchants develop discount and affiliate program with curated data and management. Prior to going the entrepreneur route, Brook got his start at Zappos where he developed his passion for affiliate marketing. Since then, he started his own firm and is on the fast track to major growing by acquiring other agencies and/or their books of business.

Do You Need To Be a Big Agency In Order to Buy One?

Nope! At the time he acquired his first agency, Brook’s firm had just 10 remote employees. The first agency he bought was PartnerCentric, which was of equal size to his agency. The existing owner was burnout and looking for an exit strategy. He said the process was long (it took two years!) and sometimes frustrating, but totally worth it in the end.

Do You Need A lot of Cash to Buy Another Agency?

Nope! According to Brook, an agency is generally worth 50% of its topline revenue excluding media revenue (since that can fluctuate). The problem is most sellers want to build retirement cash into negotiations and therefore expects to get more than it’s worth.

However, once you reach an agreement on the valuation you don’t need all that in upfront cash.

How do you know what your agency actually worth? My formula differs from Brooks somewhat because I factor in a multiple of EBITDA. You can check out my valuation chart here. But it all boils down to this…

Your agency’s value is the amount your willing to sell and which a buyer is willing to buy.

But you don’t need to have a ton of cash laying around in order to buy an agency. Standard funding includes a cash downpayment of between 10-20% with the remainder delivered in one of four ways:

  1. Cash upfront (which is difficult for most people).
  2. SBA Loan from a bank (which involves a lot of paperwork and hoops to jump through).
  3. Third-party funding (which may involve giving away equity).
  4. Seller-held note that is payable over a few years.

Brook’s acquisition was funded with a cash downpayment and a seller-held note payable over the course of two years. It’s risky for both parties, but it’s the best way to move forward without needing anyone else’s permission.

How to Structure an Agency Acquisition

Advice from both of us who have bought and sold agencies -- involve lawyers in as little as possible. The bulk of negotiations can be done without racking up attorney’s fees.

Determine whether it’s an asset sale or equity/stock sale.

  • An asset purchase is buying the agency’s book of business, including client contracts, trade name, payables, and receivables.
  • An equity/stock sale is buying out the owner(s) interest in the business.

Brook says an asset sale is much clearer and easier to manage. It also creates a cleaner exit strategy for the seller so he/she can move on.

The 4 Criteria of a Good Agency to Acquire?

1- Readiness. The seller needs to be genuinely ready to sell. A lot of times people put feelers out and then hesitate when it gets real. If you sense any mixed feelings, walk away.

2- Culture. Remember, in most cases, you’re inheriting a team too. (There will be technical stuff about firing and immediately rehiring them, but most sellers will want to make sure their team is taken care of.) So make sure their team’s vibe will gel with yours. After having acquired multiple agencies, Brooks says the team is typically thrilled for the new vibrancy.

3- Numbers. How stable is this agency? How profitable are their accounts? It should go without saying, but you need to make sure they’re running healthy books.

4- Skillset. Are you confident that the acquired agency and its team can work the way your existing agency works? If you’re acquiring an agency to expand your foothold in the market then skillset is key. If you’re buying to add a service then it’s less important that they match your agency's skill set instead you want theirs to compliment yours.

Considering selling or buying an agency? Check out more details about the process here.

 

Direct download: How_An_Agency_Used_Acquisitions_to_Double_Growth.mp3
Category:general -- posted at: 5:00am EST

Do you feel like your agency is stuck with subpar employees? Think maybe you have all the wrong people but too afraid to clean house? Firing employees is never easy. But, underperforming or toxic team members will kill your agency's growth. Check out the story of how one agency fired his entire team twice, the aftermath of the experience, and what learned by rebuilding.

In today's episode, we'll cover:

  • Why your agency needs a financial model.
  • Creating a culture of personal ownership.
  • 2 mistakes that led to firing all employees.

Today, I talked with Aaron Edwards, co-founder of The Charles NYC. Aaron quit his job, moved from London to NYC, and created a digital marketing agency. Since then, Aaron's agency has grown into a multi-million dollar phenomenon. Success didn't come without hard work and many lessons along the way. In fact, he's had to fire ALL his employees twice. Talk about "cleaning house."  Aaron shares some great growth tips, including how to inspire culture, and which two mistakes led him to fire his entire team.

Why Your Agency Needs a Financial Model

Aaron worked in finance before he started his agency. And, his biggest financial tip is this — have a financial model. This means pulling out spreadsheets and diving into some math (which is something us creatives aren't usually in to). But, having a financial model can save you a ton of time and headaches in the long run.

Here's a great way to get started. Think about the revenue goal you want to reach. Then, work the math backward to figure out how to get there. And, use those insights to create the right financial model. In most cases, you either need more clients or you need to charge more.

You also need to figure out how to build up cash reserves to make it through some lean times (think 3 - 6 months of salaries and expenses). Plus, you should obtain a line of credit for the small emergencies. Ideally, secure the line of credit when you don't need it, so it's already available for when you do! And, cut your margins down as slim as possible. Remember, putting profit first can growth hack your agency.

Creating a Culture of Personal Ownership

Want to know what kills agency culture faster than anything? Egos!

If your employees are taking failures too personally — they won't last long. Every agency has failures, but the difference is how you recover from them. Teach your team to treat failures as learning opportunities. Every employee has to be able to take ownership within their role without worrying that a mistake or misstep will threaten their credibility.

To achieve this, you need an open culture. Employees should be able to talk to their leadership team about bad experiences. And, agency management should offer coaching/mentorship sessions to help fix issues. Don't let failures drag an individual or entire team down. Create an open culture where mistakes and failures are embraced.

2 Mistakes Which Led to Firing All Employees

Aaron had to fire his entire team twice and rebuild the agency. Looking back, he says two big mistakes led to the massive house-cleaning:

  1. Not providing enough opportunity. You have to give your employees the opportunity to grow and communicate what that growth looks like. This means providing a clear roadmap to success at every step. It's not enough to tell them they can advance within the agency — they need to see it what that looks like. Aaron says his mistake was not providing showing his employees how to grow within the agency. When you don't do this, the good ones look for opportunities elsewhere. Or worse; productivity decreases as they get complacent.

  2. Not hiring for culture. You can teach someone skills; you can't teach them culture. Always think about how a new hire is going to fit into your company. If you don't, you may end up with a mishmash of different personalities and a bunch of cliques. If you see one of your employees isn't participating and they don't seem like a good fit, its ok to get rid of them. One bad apple spoils the bunch. And, when your entire team has a poor culture, firing them all may be your only option.

Direct download: 2_Mistakes_That_Led_an_Agency_to_Fire_All_Their_Employees_1.mp3
Category:general -- posted at: 5:00am EST

Not sure how to find and hire the right digital agency talent to help you grow? Here's the 8-steps one agency owner uses to build his business. He is also diving into reasons why niching down has was a good decision and the most important focus of agency sales pitches.

  • 3 reasons your agency must niche down.
  • The only kind of profit that matters.
  • 8 steps to hiring culture-fit digital agency talent.

Today, I talked with Chris Martinez Co-founder of DUDE! — an agency that provides unlimited web designing for other agencies. Chris has been through the ropes as an agency owner. And he's worked hard to figure out how to nail pitches, niche down, and hire that perfect prospect. Plus, he wears a wrestling mask sometimes. What's not to love?

3 Reasons Your Agency Must Niche Down

Chris said the single best decision he made in order to help his agency grow was to select a niche. And if you haven't yet, you need to niche down, too! Here are 3 reasons:

  1. Clients will come to you. Niching down accelerates word-of-mouth. Now, I don't want you to rely on referrals to grow your business but when you are able to generate a buzz as a specialist within an industry or a specific skill set that establishes authority in your niche.
  2. You don't have to re-invent the wheel. If you're taking on any and every client, it can be tough to build processes. When you choose a niche, you know exactly what you have to do. You can build simple, effective systems and processes to become efficient.
  3. Targeting clients is easier. Building a buyer's persona gets 100x easier when you identify a niche. You know exactly who you're going after, where they're at, and how to speak their language.

Related:  How Your Agency Can Pick a Niche and Dominate It

Besides, your clients really only are about 2 things:

  1. What do you do better than your competitors?
  2. What results can you give them?

That's it! So why not start thinking high-level. Be specific in who you serve and create processes that give you an edge over your competitors. Use your successes and case stories to win even more business in the same category.

The Only Kind of Profit that Matters

Everyone wants the big clients, right? But bigger clients aren't the key driver to agency growth. It's profitability. For example, when your first big client comes in with a $50k contract, you're going to want to say YES! But, how much of that $50k is really hitting your bottom line?

You might be a 7-figure agency but if your margins are single digits then gross revenue doesn't mean squat. Conversely, you might be a $300,000 agency who's really learned how to tighten your belt and coming home with 40% profit, then you're doing really well for yourself.

If your bottom line isn't where it should be, you need to pivot. Carve out your niche, determine where your expenses have gone askew, and then go lean and/or raise your prices. Do whatever it takes to put you where you want to be. Sure, you may be taking some losses when you first startup. But, if your agency is established and you're margins aren't at 30% or better, it's time to change courses.

And that change may start with learning how to say NO!

8-Steps to Hiring Culture-Fit Digital Agency Talent

Hiring someone who has the skill set to do a job is easy. Hiring someone who wants to do a job in the environment and with the team you've created can be a bit tougher. Chris says to hire people for their culture-fit, not their technical-fit. You can teach someone a skillset but you can't make them change who they are.

Chris has an amazing culture-first hiring process inspired by the way they do things at Zappos.com.

Here's his agency's 8-step hiring process

  1. Post the position publicly. (Obviously.)
  2. Identify candidates' soft skills and hard skills from their resume and application. Chris always puts more value on soft skills. You want to see who a person is — not just what they can do.
  3. Send the best candidates a questionnaire. You can find out a lot more than just their answers to the questions... like, how fast do they respond? Do they pay attention to details? Can they meet the deadline? Do they follow direction? Are they going above and beyond expectations? If you ask them to send you 5 examples, did they only send 4?
  4. Schedule a phone interview. Talking to someone can help weed out applicants early. Are they polite or rude? Authentic or fake? Aggressive or grumpy?
  5. Send a technical skills test. Do they actually have the basic skill set they're hiring for?
  6. Send a psychometric test. This helps you figure out who they really are deep down. These aren't perfect, but they can help you get rid of a bad fit fairly early on.
  7. Schedule an in-person interview. Chris has a round-robin interview style with 4 - 5 people. Each person talks to the potential hire. Then, they meet afterward and see if all parties are in agreement for hiring them. They ask each other:  "Would you work with them?" and "Would you work for this person?" Everyone must answer in the affirmative or they pass on the candidate.
  8. Give the candidate a final job-related task. Make sure they know how to perform and can do so on deadline. For Chris's agency this is particularly important because they're hiring developers and designers.
Direct download: 8-Steps_to_Hiring_Amazing_Digital_Agency_Talent.mp3
Category:general -- posted at: 5:00am EST

Curious how to stand out and win more clients in the crowded agency space? Wondering how the big agencies got so big? For starters, stop being a "me too" agency trying to do what everyone else is doing. Stop trying to be what everyone is...  you do you. We are always working on our weaknesses, instead of focusing on our strengths. Instead, we should focus on our strengths, leverage the weaknesses, and be a little bit of a freak in order to stand out.

In today's episode, we'll cover:

  • Why your agency needs to be a reflection of you.
  • What is your agency's freak factor?
  • 3 reasons you should embrace your weaknesses.

Today, I talked with David Rendall — professional speaker, author, entrepreneur, and freak-enthusiast. David is incredibly passionate about the big-picture agency stuff. He shares what he calls the Freak Factor and his recipe for entrepreneurial success. This week alone David has traveled around the globe -- Dublin, Paris, London, and Egypt talking to businesses and entrepreneurs about one thing -- winning through uniqueness.

Why Your Agency Needs To Be a Reflection of You

As digital agency owners, we're prone to looking around for the best way to do things. It's part of our DNA. We like to be on top of the latest technologies and hottest trends in digital. But, when it comes to your agency's culture, outside is the last place you need to look.

David says your agency needs to be a reflection of who you are. We throw the word "culture" around a lot but, culture isn't a hidden mystery; it just takes a solid look in the mirror. Virgin Mobile started off zany because Richard Branson is definitely zany! Walmart is all about logistics, inventory, and pricing — it's super practical because Sam Walton was super practical.

Leverage your personality traits to create an agency you would want to work at and that alone will attract the right people. The culture will practically create itself once the vision and tone is set by you.

Don't just create another "cool agency" — create something that helps you surround yourself with a like-minded team who will be an asset is carrying out your vision.

What Is Your Agency's Freak Factor?

Too many agency owners want to be like the big kids. They think they need to copy the big agencies in order to be as successful as one.

Listen, Snapchat didn't just create a mirror copy of Instagram. They decided to do something new. Instagram is for showcasing images, so Snapchat took a different angle and made those images disappear. If the crowd is going one direction don't follow them. You'll find more success if you let them lead you toward your own, unique solution.

David's advice is to find the gap in the market and then attack it. Don't just offer another solution like everyone else. Put your own twist on it, and offer a unique strategy for getting your clients the results they desire.

3 Reasons You Should Embrace Your Weaknesses

If you walk away from this podcast with one lesson, it should be this: work on your strengths, not your weaknesses.

  1. Fixing your weaknesses may destroy your strengths. It's true! David likes to use the Walmart and Target analogy. Walmart is known for cheap prices and crappy service. Target has great service and a little higher pricing. If Walmart improves its customer service with added training and increased employee pay, it cuts into their margins and costs go up. Ditto for Target. They both eliminate their strength if they focus on improving their weakness.

  2. Your weaknesses might be your strengths. Is your agency small? That's not a weakness! That's a poorly positioned strength. You're not small; you're personal, nimble and agile. You can tell clients, "Yes, we're small and that means you can talk directly to me and won't get lost or forgotten." Think about your weak points and figure out how to leverage them as strong points.

  3. Strengths can get even stronger. Even if you can't find a way to turn your weaknesses into strengths, don't worry - you don't need to. Disregard your weaknesses and instead, focus on improving the things you're great at. Hone your craft and be the best damn {fill in the blank} the market has ever seen.

Are You Looking for Outsourced Copywriting for Your Agency or Clients?

Verblio is a content creation solution designed specifically for agencies. Their writers can help with everything from blog posts to ebook to video scripts and more.

Forget the hassle of finding and hiring your own writers. Verblio has a pool of more than 3,000 highly vetted writers who produce custom, SEO-rich content. You set the criteria for style and tone and they match you with writers that have expertise in your specific subject matter.

Verblio's platform is designed specifically for agencies -- and for a limited time, they are offering my audience 50% off your first month of content. My team is using Verblio and loving it, so make sure you check them out.

Direct download: How_Being_a_Freak_Will_Land_Your_Agency_More_Clients.mp3
Category:general -- posted at: 5:00am EST

1