Preparing for M&A as a Digital Agency Owner with David Sheehan
Most digital agency owners have a few goals for their business — to do something they love, to help other people, to make a good income, and to scale and grow their business.
But what about extracting some future value from the business?
Even if they’re not looking to get out of the operations yet, many business owners have an eye on the future where they may sell or divest themselves from it and extract some kind of future value.
This is where David Sheehan comes in. As a managing partner at Athru Partners, he’s worked with hundreds of digital agency owners to set them up for the next steps in their businesses.
David joined us on a recent episode of the Stride to Freedom podcast and shared how digital agency owners can prepare for M&As and the future of their businesses.
What Are Your Future Goals?
Most digital agency owners come to David for one of two reasons:
- They’re ready to grow and scale their business but have something blocking them from the revenue increases they’re looking for.
- They’re ready to exit their business and looking forward to the next steps.
In both cases, David’s job is to help them evaluate their business objectively and answer a simple question: what value does this business offer?
Because a valuable business is one that’s poised for great growth, which benefits you in both the short term as the owner, and in the long term when you’re ready to sell or exit the business altogether.
What Makes a Business Valuable?
It’s important to understand the value of your business. This is in both practical terms — what do you have to offer clients? — and financial terms — why would someone else want to buy your business?
To understand the value of your business, David identifies three key elements:
- Excellent financial stewardship: What are the financial drivers of your business? What do you need to do to keep growing and excelling financially?
- Organizational success: How is your employee retention? Are you struggling to hire the right people? How is your business held together?
- Growth: What’s the future outcome of your business? Is it scalable?
These may be seen as external, objective factors — things you can observe and measure.
But there’s another big factor that influences the value and future opportunities for your business: openness to change.
The reality is that change is difficult, but it’s also inevitable. Even if you have everything “practical” in place, it can still be hard to go through a period of change when you pursue an M&A for your company. Business owners need to be prepared for change in the same way they prepare financially and organizationally.
Getting Ready for M&A
David’s process of working with digital agency owners who are preparing for an M&A always starts with an Attractiveness Readiness Assessment.
Simply, this is a way to see if your company is attractive to buyers.
It’s a comprehensive tool that looks at 74 key parts of your business, such as:
- Financials
- Organization
- Services offered
- Client turnover
This is all compiled into an objective report that provides a snapshot of where the business is and how it looks in comparison to other businesses in terms of their size and configuration.
From there, digital agency owners either realize they have room to grow, or that they are ready for an M&A. David will then work with them toward the next steps, such as preparing a Confidential Information Memorandum (CIM) and approaching potential buyers.
There’s more to it than this — M&As for digital agencies can be a complex process. If you’re wondering about the next steps for your business, tune into the Stride to Freedom podcast episode with David. In it, we talk about specific revenue and financial numbers you should be hitting as well as the detailed steps of preparing for an M&A as a digital agency owner.
If you have more questions, you can also reach out to David on LinkedIn or through the Athru Partners’ website.
——————-
This Stride Live Webinar is hosted by Stride Services. Stride is a comprehensive financial solutions provider, specializing in outsourced bookkeeping, accounting, tax, and advisory services for Managed Service Providers.
If you’re interested in being a featured guest on our Live Webinars or if there’s a subject matter expert you’d like us to interview, please let us know!
——————-
Show Notes + Transcript:Â
David Sheehan: LinkedIn
Athru Partners: Website/LinkedIn
David Sheehan: Email
Webinar Transcript:Â
Preparing for M&A as a Digital Agency Owner with David Sheehan
