No one will own their agency forever. Whether you plan to sell your business, transition to new leadership, or simply step back from day-to-day operations, have you considered: What’s your agency Exit Strategy?
Recently, a business acquaintance reached out to me with an urgent request. An agency owner had passed away unexpectedly, and the family needed guidance to save the business. I briefed their financial advisor on key points to consider as they prepared the business for sale. Fortunately, they had a strong #2 in place—and I referred the family to an M&A specialist.
They’re very lucky—the agency owner hadn’t prepared for this to happen, but the sale will likely produce a multi-million dollar legacy. But without a strong #2—and without trustworthy experts helping them navigate the exit—they might have had to close the agency, while laying off all the employees.
If you’re reading this, you have the advantage of time to plan ahead. Let’s explore why an exit plan is essential and what it should include. Plus, I’ll share details about a workshop designed to help you prepare for a successful exit, no matter how far off it may seem.
Why you need an Exit Plan at your agency
I ask new clients if they lean an Equity or Lifestyle business. That is, do they plan to sell their agency (an “equity” exit event) at some point, or keep running it for the foreseeable future (a profitable lifestyle business)?
How would you answer that question? Most owners are somewhere in the middle. Importantly, this answer tends to change over time. You lean Equity, but realize you’re enjoying the business again—and selling isn’t as urgent. Or you lean Lifestyle, but your life priorities change and you decide you want to do something new.
The big change, on shifting toward Equity? I see agency owners get to the point that they’re tired of the day-to-day grind of running an agency. Or they’re ready to retire—or pay for their kids’ college expenses—and you need to cash out on your years of effort building the business.
Whatever the reason, you’ll likely get a better outcome if you’ve intentionally prepared for this day. Want the most options? Ideally, your agency exit strategy starts years before your last workday.
What to include in your agency Exit Plan
At a high level, consider these points as you start writing your exit plan. Feel free to start a new document, or write it by hand, or use a mindmapping tool—whatever is best for you.
- What’s your ideal exit? What does it look and feel like? Do you have a specific outcome in mind? How would you summarize it, to help you enlist others toward reaching that goal?
- How much money do you need from the business? In the past, owners would often tell me they wanted to sell for $5 million. Today, that number is more like $10 million. Keep in mind that you’ll likely pay a fee to a business broker, and you’ll also pay for lawyers and other advisors. And there may be tax implications, too.
- How soon do you want to exit? As a coach, agency owners often say they want to sell in 5-10 years. Sometimes it’s sooner, like 3-5 years. If you want to sell within one year, you should be engaging an M&A specialist now—whether a business broker or other M&A advisor. My go-to recommendation is Punctuation. I also hear good things about Spring Advisors. And TORRO Group works with agencies, too.
- How long are you willing to work in the agency? Most exits will require staying involved for anywhere from six months to several years. This is negotiable. But importantly, few acquirers want you to leave cold turkey.
- Are there specific terms you have in mind? My clients often mention they’re concerned about having jobs for their employees. This can limit your acquirer options, since financially-motivated buyers usually won’t want to commit to keep the entire team (although they might agree to keep certain executives for 6-12 months, to ease the transition).
- Are there other stakeholders in the exit plan? This likely includes your romantic partner, and any business partners. But it also likely includes your leadership team, regardless of whether they have phantom equity. Will they be contracted to stay? Or does the deal assume some will be terminated immediately? Do you have an office lease or other big commitments? Do you have personal guarantees on a Line of Credit or other loan?
- What needs to happen to get to this exit? You might need to get a valuation, create a succession plan for promoting or hiring a second-in-command.
- Who’s your ideal acquirer? If your goal is for the agency to keep operating as-is, it might make sense to sell to an internal buyer (e.g., your COO). If your goal it maximize your take-home payout, a private equity firm might be a better match—although your employees likely won’t be as thrilled. Maybe you’d sell to a competitor, or to a client.
- What do you want to do after the exit? “Do nothing” is fine—but my experience is that few people sit at home forever, or play golf in perpetuity. Some clients have specific goals—like changing careers, becoming semi-retired, starting a new business, or spend more time with family members now that they’re not running the agency. You might have specific travel or other leisure goals. To get existential, who are you when you’re not a business owner or CEO? Whatever you have in mind, make a list.
- Are there any unique circumstances to consider? Do you need to “hang in there” to get a specific valuation? Do you have a business partner who’s refusing to cooperate? Do you want to try to sell the business to an internal buyer first, and then regroup on an external sale if that’s not a match? Each exit is unique; consider your Ideal vs. Minimum Acceptable outcome.
- What do you need to do to close the gaps between where you are today, versus your ideal exit? We cover tips for this in Session 3 of the Control (and Maximize) Your Agency Exit workshop, and you can add 1:1 help.
Get help making your agency Exit Plan come true
Your agency exit requires more than just an Exit Plan—you need to turn that plan into reality. For some agencies, that means creating a succession plan, to develop a key team member. For others, it means hiring an external #2 and preparing them to take over, to help you walk away faster. You might also need to have some difficult discussions with business partners and key employees.
Here are three options to streamline reaching your ideal exit:
- Comprehensive advice: Get advice on what to do in the next 1-2 months—and then the next 1-2 years—via an Agency Growth Diagnostic.
- Deep-dive training: Get tips and advice from a range of experts, in my “Control (and Maximize) Your Agency Exit” workshop (in October 2024, and on-demand), at a fraction of the investment of a larger project.
- Quick opinion: Get a quick opinion about how ready you are to sell your agency, via a one-off ActionPath call.
Whatever you choose, start your exit plan now. You’ll be glad you did!
Question: What’s your ideal agency Exit Plan?
