There is both a qualitative answer to this question which is “how much profit does my agency need to make before I sell it?” And, a more qualitative or quality of life question of “do I really want to part with my agency?” that only you can answer.
The answer to the first question is one that I can help with. Marketing agencies and other service businesses should have:
- A positive growth trajectory for at least the past 12 months
- Should be at least 3 years old.
Note: Most agencies are still small and somewhat undesirable at this stage.
- Should have clean financial statements and operating procedures
- Should have account reps to handle 90% of the sales work and client work
Note: this holds up the majority of agencies we see from selling for top dollar.
- Should be automated to the point that the seller can run it on less than 10 hours per week.
- Should make at least $250K in annual profit (other brokers and marketplaces will still take you if you’re smaller)
If your agency does not check ALL of these boxes, don’t worry. you can still sell your agency, but it will likely hurt your valuation some. Generally speaking, buyers aren’t going to pay a premium to: buy themselves a 40 hr./wk job, buy a diminishing business or buy a business where the financials and operations are not clear.
I’ve found that the answer to the quality of life question is somewhat simple; If you still love working on your business, the answer to this question is simple…Don’t sell it.
You have invested years of your life building your business and it may feel a bit like selling your first born. However, you have likely heard of “agency burnout” and may even be feeling it. Since you made your way to this article, the chances are that you, like most entrepreneurs have reached a point where you would rather move on to your next project.
It’s an entrepreneurial right of passage to build a business, see a greener pasture and sell your current project and pursue this new venture. Building new businesses, getting tired of them, selling and starting again with a fresh slate.