How Much is your Agency Worth?
Congratulations! You’ve built your agency from scratch and grew it into a business to be proud of. Now you’re getting ready to sell it. Of course, you’ll want to ask the highest price possible.
The good news is the average median sale price of small businesses in the U.S. has reached an all-time high. Service-oriented businesses (such as advertising agencies) had a 17% increase in revenue in 2019, which resulted in a 22% jump in sales value.
So, how do you determine the value of your agency? You could hire a professional Business Valuator, which is a smart choice when you’re ready to sell. For a quick number, use a convenient business valuation calculator.
The following will factor into the actual value.
The balance sheet is a good starting point. Determine the value of your agency’s assets. As you might expect, the larger the business, the higher its value. But there is so much more to consider when calculating the value of your agency, such as the number of clients, debt and history of growth rate.
Look at the previous two years. Did your agency have a high profit margin or did you experience low profit margins (or even loss)? Showing healthy annual profits will boost the value of your agency. Pulling together your financial statements can be a huge undertaking if you’re doing things manually or with an outdated system. A powerful accounting system will streamline the task and save you from drawing focus away from running your business.
What is the size of the market and what is your share of the pie? A saturated market with stiff competition will affect the value of your business. Is the market expected to grow? Have a road map that presents a picture of growth opportunities that could be exploited with more capital. This will enhance the perceived value of your agency.
Does your agency have solid systems and processes? Workflows with bottlenecks and outdated agency management systems impede growth. Automation adds value. So does having competent and responsible management. If you were to exit the company, would it continue to grow or would it fall apart? Scalability strengthens a company and contributes to its continued growth.
What sets your agency apart from the competition? Offering unique service (or level of service) that puts your business a notch above others in your industry will have a positive effect on its value.
Now that you’ve estimated the value of your agency, it’s time to prepare for the sale. We’ll cover that in a another post. Sign up below for a notification!
A powerful agency management system increases staff efficiency, makes it easy to pull financial statements for buyers, and adds to the overall value of your business. Advantage Software is purpose-built for full-service advertising agencies, creative teams, public relations firms, and marketing firms of all sizes. Over 850 agencies use Advantage for Accounting, Project Management and Media. With features like a built-in document management repository, schedules, agile boards and a training video library, it has everything you need to manage your business. We’ve been helping our clients maximize productivity, efficiency and profitability for over 40 years. Find out how we can help you by contacting us for a demo. If you simply would like to learn more, sign up for our free Newsletter.