Why would you want to sell your SEO company?
Whether you are just getting started or have been in the SEO industry for a long time, the thought of selling your agency might come as a shock. Your initial reaction could be, “I would never be able to sell this business – I love my company and doing what I do every day.”
But don’t hit the back button – even if you feel that way, you should still be running your business as if you plan on selling it.
The time to prep your SEO agency to sell is now.
And the reason for that is it is better to put the effort into building your business this way sooner rather than later. That way, the option to sell will be available if need be, instead of having to realize too late you didn’t set things up correctly for an eventual sale down the road and are forced to deal with a much more difficult process.
The truth is, you never know what life can throw at you. It could be that you end up wanting to spend more time with your family, or need a large lump sum to cover some kind of unexpected life expense.
An unforeseen change in your work circumstance such as switching careers, discovering new interests, deciding on retirement or many other factors could be considerable reason to pursue a new direction.
By structuring your business to sell – even if you don’t plan to do so anytime in the future – you will be able to quickly exit the business easily should the need or desire arise, and increase the value of your SEO company in the process.
What investors are looking for when buying your agency
While there are many reasons a digital investor might be interested in acquiring your agency (such as buying out a competitor, get into the SEO business without having to start from scratch or simply looking to expand their investment portfolio), there are some things all buyers will be looking at when considering your company for purchase.
When you take the time to make sure that your business meets these qualifications now, you will be setting up to sell when the time comes so the transition will be made as seamless as possible.
1. Recurring Revenue
A business model oriented around a subscription-based product is one that proves to be highly successful in multiple industries, and SEO is no exception.
SEO businesses are very attractive to digital investors for the recurring revenue benefits. Investors love to see companies that have a tail to their revenue. While pulling in the additional income by offering one-off solutions for clients such as an on-site audit or AMP integration, the biggest advantage is going to come from consistent monthly and annual income from a budget that everyone agreed upon up front.
Monthly income from a host of different clients at different times is of course beneficial, however it is less predictable – and consequently less valuable – to a prospective buyer than recurring revenue from a loyal client base.
And for most SEO businesses, recurring revenue from a platform of long-time clients is a given. Customers usually want regular effort put into maintaining or improving their site’s rankings, which means a monthly paycheck for those services. Make sure your company offers a sustainable SEO service that keeps clients happy and consistently coming back for more.
2. A Replaceable Business Owner
For a moment, put yourself in the shoes of a potential buyer. Ultimately, buyers are looking for an asset. They don’t want another job. They don’t want a hundred more daily responsibilities and all of the stresses that come with having to be involved knee-deep on a daily basis. They want something that will be highly profitable for them with as little additional effort as possible.
The problem is that many agency owners are very busy people. They are spread thin trying to juggle sales, accounting, customer service and sometimes even doing the actual work themselves.
In order to correct this, you have to make sure that you, as the business owner, are replaceable. That means that the business needs to be able to run with or without your direct involvement.
In many cases, that means the necessity of hiring additional help to run things. Training employees to do the tasks that you normally would perform yourself not only frees up your time, but makes your business much more attractive to potential buyers as a result.
Agency selling expert John Warrilow, author of the very valuable guide for business owners called “Built to Sell” aptly puts it:
“Many people have tremendous successful [employees], add tremendous value, but don’t confuse the doing with actually owning a business. Because even if you’ve got employees, if you’re the person the client wants to see to build a strategy, to design the design, to write the copy, you’re not an owner of a business, you are a glorified employee. And that’s a tough, tough message to hear, but again, if you get all sorts of ego gratification from being the guy the client goes to for advice, by all means, be that guy, but don’t expect to sell your company. Don’t expect your company to be worth anything.” – John Warrilow, interview with the Agency Management Institute
3. Proven Earnings History
Investors want to see a consistent growth curve over a long span of time. This shows that there have been proven earnings as well as a history of success behind the company that can help to predict future earnings, making them feel more secure about the investment.
Businesses that display a sudden “hockey stick” spike of growth within the last 6 months of wanting to sell are understandably a red flag, as well as a business that has not well documented their finances.
Ensure that meticulous records are kept of your company’s income and expenses for as many years back as you can. This will increase buyer confidence and the value of your business to them, as well as determine how your agency is performing for your own benefit.
If you don’t already have a bookkeeper involved in your company, consider bringing one on as soon as possible. It will reduce the load off of your shoulders, as well as enhance the value of your company overall.
4. Solid Client Base
If your business depends completely on serving only a few customers, that is a considerable risk. It would only take one of those clients to drop off one day for the company to lose a third of its income. This makes for a much more risky investment and consequently, low buyer interest.
In order to fix this issue, you will need to put some serious effort into getting more clients to diversify your income stream. A good place to start could be with requesting client referrals from the customers you already have.
Then branch out into other methods of lead generation as well as investigating link development strategies for improving the chances of customers finding your business online. A solid client base is one of the most effective ways to boost the value of your brand and position your business to sell.
5. Servicing a Targeted Niche or Area
If you can specialize your SEO agency around either a certain client niche or location, that will add extra value to the asking price. Focusing on a target market might seem counter-intuitive – after all, why limit yourself to just one specialty when you could service everyone?
However, it is just that strategy that has made hundreds of successful, niche-focused agencies on the Inc. 500 and Inc. 5000 lists in recent years. Investors love to see a laser-targeted agency that services a unique group of clients and focuses on ranking the agency website around a very specialized set of keywords rather than more competitive broad ones.
By servicing a particular segment of clients in an industry or area rather than a general one, it offers several distinct advantages – one of which is being able to acquire new customers more easily as well as keep your existing client base well-served.
It is arguably easier to focus on doing one thing very well than to spread yourself thin trying to cater to a diverse client base with different business models. Trust from prospective clients is considerably higher in a group of specialists in a segment of the market and sets you apart from the competition in an exclusive way.
Have you ever tried selling an agency or want to do so at some point? Leave your comment below!
Note: The opinions expressed in this article are the views of the author, and not necessarily the views of Caphyon, its staff, or its partners.