Speaker 2 5:06
Ouch. That’s gonna sting a little bit looking back, yeah, but I guess even seasoned entrepreneurs can miss out on Yeah. It happens those golden opportunities sometimes totally it really makes you think, right? It does. How many times have we dismissed an idea because it seemed weird, unconventional, only to see become the next big thing.
Speaker 1 5:29
It’s a powerful reminder to stay open to possibilities, definitely, even if they come in unexpected packages, yeah, just like that mischievous Elf on the Shelf.
Speaker 2 5:38
Like that Elf on the Shelf.
Speaker 1 5:39
Okay, so we’ve established that profitability is king, and sometimes you got to think outside the box to spot the real winners, Yeah, but how do you actually measure an agency’s success beyond just revenue?
Speaker 2 5:52
That’s where those all-important KPIs come in. Jason highlights, yeah, a handful that paint a much clearer picture of an agency’s health and potential.
Speaker 1 6:01
All right, hit me with them. Okay, which KPI should I be obsessing over?
Speaker 2 6:05
Well, we’ve already covered the big one, the EBITDA. But beyond that, yeah, there’s MRR or monthly recurring revenue, okay? It’s the lifeblood of a stable agency, because it gives you a predictable income, right? This means you can confidently invest in growth knowing you have a steady base.
Speaker 1 6:23
Yeah, that makes a lot of sense. No more feast or famine cycles, right? So what else is on the list?
Speaker 2 6:28
Next up is A C T, or average contract term? Okay, longer contracts are like gold, really? Why is that? Because they show client loyalty and reduce churn.
Speaker 1 6:39
So if I’m locking in clients for a year or more, that’s a good sign.
Speaker 2 6:44
Absolutely. It shows you’re delivering value and building strong relationships, right? And speaking of churn, okay, keeping that rate low is crucial. Okay, it basically measures how many clients are jumping ship. High churn means you’re constantly scrambling to replace lost business. Low churn means happy, loyal clients who are sticking around.
Speaker 1 7:07
So I want to see that churn rate, as close to zero as possible.
Speaker 2 7:11
As close to zero as possible.
Speaker 2 7:12
What else should I be watching?
Speaker 1 7:14
Another important one is average expansion revenue.
Speaker 2 7:17
Average expansion revenue.
Speaker 1 7:19
This is all about growing existing client accounts, okay? It shows you’re not just keeping clients happy, right? You’re finding ways to provide even more value and deepen those relationships.
Speaker 2 7:30
Got it so it’s not just about getting new clients, right. It’s about maximizing the ones you already have . Okay, what’s the last KPI on our list?
Speaker 1 7:38
Last but not least, we have NPS, or net promoter score, this measures how likely your clients are okay to recommend you to others.
Speaker 2 7:49
Ah, the good old word of mouth factor.
Speaker 1 7:52
Exactly a high NPS means you’ve got an army of brand ambassadors out there singing your praises.
Speaker 2 7:57
This is starting to make a lot of sense. It’s not just about the vanity metrics, like revenue, yeah, it’s about building a business that’s profitable, stable and client centric. Yes, you got it. It’s about creating an agency that’s attractive to both clients and potential acquirers, right? But there’s one more important piece of the puzzle you need to discuss, okay? And that’s the team you build.
Speaker 1 8:21
Okay, let’s talk team building. All right, what does Jason have to say about putting together a winning squad?
Speaker 2 8:28
His advice is surprisingly simple hire based on your weaknesses.
Speaker 1 8:32
Ooh, I like that. Yeah, yeah, that’s good.
Speaker 2 8:35
It’s so refreshing to hear that you don’t have to be a master of everything right to build a successful agency, right, right? It’s about recognizing what you’re not good at.
Speaker 1 8:45
And bringing in people who excel in those areas. It takes a lot of self-awareness, yeah, but it’s a sign of strong leadership.
Speaker 2 8:56
So for example, yeah, if I’m amazing at landing new clients, but my organizational skills are a mess, I should prioritize hiring a rock star Operations Manager.
Speaker 1 9:08
Spot on. Okay, that frees you up to focus on your strengths, right? Bringing in that new business while knowing the agency is running smoothly behind the scenes,
Speaker 2 9:17
Makes sense. What if I’m the opposite? Okay, a total operations Wiz, but terrified of sales calls.
Speaker 1 9:22
Then find yourself a killer salesperson. Okay? It’s all about balancing out your weaknesses right to create a well-rounded and high performing team.
Speaker 2 9:29
And this isn’t just good for the day to day running of the agency, it also makes it way more attractive to a potential buyer.
Speaker 1 9:36
Absolutely. Buyers want to see that an agency isn’t completely reliant on the owner. Yeah, a strong team signals that the business can thrive, right, even if the owner steps back. Okay, this is all making a lot of sense. Now, Jason’s company, Republix, is doing some pretty interesting things in the agency acquisition space.
Speaker 2 9:54
Definitely, they’re building something they call a world leading growth search. Service platform by acquiring agencies and tech companies.
Speaker 1 10:03
Wow, that’s quite a mouthful. It is. But what’s really cool is their approach.
Speaker 2 10:09
Yeah, their approach is unique.
Speaker 1 10:11
Okay, I’m all ears, all right. What makes their approach so different?
Speaker 2 10:15
First, they’re not just looking for any agency, okay? They specifically target profitable agencies with over a million dollars in EBITDA.
Speaker 1 10:24
So they’re going after the cream of the crop Exactly.
Speaker 2 10:27
And instead of just swallowing up these agencies, they allow them to keep operating independently. Oh, interesting. They’re creating this collective of top performing agencies that can benefit from shared resources and expertise, right, while maintaining their own unique identities.
Speaker 1 10:44
So they get the best of both worlds. It is independence and support, right?
Speaker 2 10:48
It’s a win win. That’s a pretty sweet deal for the agencies being acquired.
Speaker 1 10:52
And they’re big on making sure the culture is aligned. Culture, yeah. Jason even uses this analogy, okay, of getting on a boat, okay, you need to know where it’s going before you jump on board.
Speaker 2 11:02
I love that analogy. Yeah, so shared vision and values are super important and when it comes to the financial side of things, Republix takes a really interesting approach to the earn out. The earn out, yes, which can be a tricky part of any acquisition. Jason shared his own negative experience with an earn out when he sold his first agency.
Speaker 1 11:25
He learned the hard way, yeah, that those performance targets tied to the earn out can become impossible to hit right if the acquiring company makes changes that hurt the agency’s success.
Speaker 2 11:35
So how does Republix structure earn outs differently?
Speaker 1 11:38
They take a lot of the risk off the table for agency owners, yeah, instead of putting a time limit on the earn out, they base it on a clear milestone, doubling EBITDA, so whenever you hit that target, you get the payout.
Speaker 2 11:51
That’s brilliant. It is a good system. It takes away the pressure of a ticking clock, right? And aligns incentives for long term growth Exactly. It’s another example of how they prioritize, yeah, partnership and shared success. Jason also emphasized the importance of understanding your own motivations, for selling in the first place, right? It’s not just about getting a big payday, right? It’s not just about the money. You need to be clear about what you want to do next. Yeah? What are you to do after he admitted that after selling his first agency, he felt lost and depressed. Oh, wow, he hadn’t really figured out what he wanted to do with his life after the agency,
Speaker 1 12:31
it’s a big decision, you know, both financially and emotionally. You’re essentially saying goodbye to something that’s been a huge part of your life.
Speaker 2 12:38
And that’s where having mentors and advisors who’ve been through it themselves can be so valuable they can offer guidance and support during a potentially stressful time. Yeah, it’s good to have people you can talk to. It’s like having a Sherpa, a Sherpa, yeah, guiding you through the treacherous mountain passes.
Speaker 1 12:57
Treacherous mountain passes. Of agency. Acquisition. Of agency acquisition exactly.
Speaker 2 13:02
What else did Jason say about preparing for a sale?
Speaker 1 13:05
He stressed the importance of having a strong legal and financial team in your corner.
Speaker 2 13:10
Makes sense. You need experts who understand all the complexities, yeah, all the legal and financial complexities of an acquisition deal. They can help you negotiate favorable terms, protect your interests and make sure you’re getting a fair deal, a fair deal. Yeah? So it’s not just about finding the right buyer, it’s about surrounding yourself with the right team of advisors. Yeah.
Speaker 1 13:32
What else should agency owners keep in mind?
Speaker 2 13:36
Jason cautioned against getting caught up in the hype of a potential sale and losing sight of your goals, right? It’s easy to get swept away by the excitement.
Speaker 1 13:46
Especially, yeah, when there’s a lot of money on the table, don’t let those dollar signs cloud your judgment. Stay grounded, right? Keep your long term vision in mind, okay? And make sure the deal aligns with your values and aspirations.
Speaker 2 13:59
And what about the agency team, the team, yeah, they must have a lot of questions and anxieties about the whole process. Oh, absolutely. What did he say about that?
Speaker 1 14:08
He’s a big advocate for transparency and open communication. Okay, keep your team informed about what’s happening. Right, address their concerns honestly and create a supportive environment.
Speaker 2 14:19
So it’s about building trust and making sure everyone feels valued during a time of transition. Now let’s circle back to Republix, unique acquisition model,. One thing that really stands out is their commitment to preserving the culture and autonomy of the agencies they acquire.
Speaker 1 14:40
They don’t try to force everyone into a cookie cutter mold, right? Yeah, they recognize that each agency brings its own unique strengths and ways of working. That makes sense. Jason used this great analogy of a fleet of ships sailing together, toward a shared destination, with each ship having its own captain. And crew.
Speaker 2 15:00
That’s a really powerful image. It is that captures the essence of their approach.
Speaker 1 15:05
They’re creating a collective of agencies that are stronger together, right, but retain their individual identities and freedom.
Speaker 2 15:13
And they believe this approach fosters innovation, creativity, and a sense of ownership among the agencies they acquire. It’s a smart strategy, plus it gives them access to a wider range of expertise and resources, which benefits everybody, everyone involved. Everybody wins. Okay, so we’ve talked about their approach to profitability, culture, get outs, earn outs, and even that clever boat analogy, the boat analogy. What else makes their acquisition process unique?
Speaker 1 15:44
They’re very selective about the agencies they bring on board. It’s not just about financials. It’s about finding the right cultural and strategic fit.
Speaker 2 15:55
So they’re looking for agencies that align with their values and vision for the future.
Speaker 1 16:01
It’s like finding the perfect puzzle piece that completes the picture.
Speaker 2 16:04
And once they find the right agency, they’re very intentional about integration. Integration. Yeah, they focus on creating a better together environment, a better together environment, where everyone feels valued and supported.
Speaker 1 16:18
It sounds like they put a lot of effort into making sure, yeah, the transition is smooth and beneficial for everyone involved.
Speaker 2 16:25
It’s not about one agency absorbing another. It’s about creating a true partnership, a true partnership, yeah, and they recognize that integration takes time. It takes time. It’s an ongoing process that requires open communication, flexibility, and a willingness to learn from each other. Yeah, it’s a two way street. Now let’s talk about the financial nitty gritty of their acquisition process. How does their typical deal structure work?
Speaker 1 16:54
They offer a combination of cash and equity, okay, in the new entity, so.
Speaker 2 16:57
So agency owners get to cash out some of their hard earned equity while also participating in the potential upside of the combined company. It’s like having your cake and eating it too, right? And as we discussed before, yes, they structure those earn out to minimize risk, minimize risk for the agency owners, the agency owners, and incentivize long term growth, long term growth. It’s all about alignment and creating a win win for everyone.
Speaker 1 17:25
For everyone.
Speaker 2 17:26
They also have a very thorough due diligence process, due diligence to make sure they’re acquiring healthy and sustainable business, healthy and sustainable. Yeah, so they’re doing their homework. They’re doing their homework before making any big moves.
Speaker 1 17:42
They thoroughly examine the agency’s financials, client base operations team, yeah, name it.
Speaker 2 17:51
It’s like a full body scan for the agency, a full body scan, I like that, and they’re very transparent. Transparency is key with potential acquisition targets, yes, about their expectations, values and vision for the future.
Speaker 1 18:06
It’s about building trust, right, and making sure both sides are on the same page. Yeah, from the start.
Speaker 2 18:11
Jason emphasized that Republix isn’t just out to gobble up agencies for their revenue. That’s not just about the money they genuinely want to build lasting relationships with agency owners who share their passion for growth, innovation, client service. It’s a much more human approach to acquisitions. It is focused on partnership and shared success.
Speaker 1 18:33
Okay, so we’ve covered a lot of ground on Republix legs and their unique approach. Yeah. What about the bigger picture of agency acquisitions.
Speaker 2 18:41
The bigger picture.
Speaker 1 18:42
What are some of the key trends and challenges happening in the industry right now?
Speaker 2 18:46
One major trend we’re seeing is a lot of consolidation, consolidated big agencies and holding companies are snapping up smaller agencies at a rapid pace. So it’s becoming a bit of a feeding frenzy out there.
Speaker 1 18:47
Kind of — there are a few reasons for this. Okay, agencies need to scale up to compete, right? They want to access new capabilities and talent, okay, and they’re looking to expand into new markets.
Speaker 2 19:09
Makes sense. Bigger is better in a lot of ways, in a lot of ways, yeah, but what about the smaller agencies, the little guys? How do they survive in this increasingly competitive landscape?
Speaker 1 19:21
It’s definitely a challenge. Yeah, they might not have the resources or scale to go head to head with the Giants, right, right? So what are their options? What can they do? They need to find ways to stand out and prove their value. Okay? They might focus on specializing in a niche area, okay, offering strategic consulting or becoming masters of delivering measurable results.
Speaker 2 19:43
So it’s about carving out a unique space in the market and demonstrating their expertise.
Speaker 1 19:49
Exactly. So being small doesn’t mean you can’t be mighty. I like that. Yeah. Another big trend we’re seeing is the growing importance of technology and data in the agency world, technology and data, okay, clients are demanding more sophisticated solutions, right? And agencies need to keep up.
Speaker 2 20:08
It’s all about leveraging the latest and greatest tech, the latest and greatest tech, to deliver better results, better results. Yeah, think marketing automation.
Speaker 1 20:17
Marketing automation, data analytics. Given AI and machine learning.
Speaker 2 20:20
AI and machine learning.
Speaker 1 20:22
It’s a whole new world out there, but I imagine, yeah, all this new tech requires a lot of investment. It does, and that’s another challenge for agencies, especially smaller ones, especially smaller ones with limited budgets. The limited budgets, yeah, they need to be strategic. They need to be smart about their tech investments, about their tech investments and find ways to maximize their ROI, maximize that ROI. So it’s not just about buying shiny new toys. No, it’s about using those toys effectively, effectively to drive real business value. Real business value.
Speaker 2 20:55
And another curve ball agencies are facing is the rise of in house marketing teams, in house marketing and those freelance platforms and the freelance platforms so they’re getting squeezed from both sides.
Speaker 1 20:55
Kind of, as companies bring more marketing functions in house yeah, and explore alternative sourcing models. Agencies need to differentiate themselves, improve their worth.
Speaker 2 21:16
It’s all about showing those clients why they need an agency, why they need an agency, and what makes that agency unique?
Speaker 1 21:23
What makes that agency unique? Yeah.
Speaker 2 21:24
So the agency landscape is changing rapidly, with lots of challenges and opportunities, lots of challenges and opportunities. So what advice does Jason have for agency owners who are thinking about selling.
Speaker 1 21:35
Thinking about selling, okay, in this ever evolving market.
Speaker 2 21:38
His first piece of advice is to get your house in order. What does he mean by that? Clean up those financials. Okay? Make sure your processes are well documented, right, and have a strong leadership team in place. So basically, make your agency look as appealing as possible.
Speaker 1 21:54
As appealing as possible to a potential buyer. Potential buyer, yeah.
Speaker 2 21:58
Buyers want to see an agency that’s well managed. Well managed, profitable, profitable and ready to grow, ready to grow. Okay, so once your agency is looking spiffy, spiffy, what’s next?
Speaker 1 22:09
It’s time to think about your ideal buyer. Ideal buyer. What type of company would be the best fit for your agency?
Speaker 2 22:17
So are we talking a larger agency, a holding company, or maybe a private equity firm. It could be any of those. Each type of buyer comes with different expectations. Yeah, expectations, investment philosophies, investment philosophies and integration plans.
Speaker 1 22:33
And integration plans. It’s like choosing the right dance partner. Oh, I like that. You want someone who matches your style and moves.
Speaker 2 22:40
And once you have a buyer in mind, yeah, it’s important to be realistic about valuation. Valuation, yeah, don’t expect to become an overnight gazillionaire just because your agency is making a profit. No, no, no. Valuation is based on a lot of factors, including size, growth rate, growth rate, client concentration, client concentration, and market competition and market competition. So you might need to temper those expectations a bit, and be prepared for a long and winding road.
Speaker 1 23:08
A long and winding road.
Speaker 2 23:09
When it comes to due diligence, due diligence, ah, the dreaded due diligence. The dreaded due diligence. I imagine that can be.
Speaker 1 23:17
It can be pretty intense. It can be the buyer is going to scrutinize everything, everything like what, financials, contracts, client lists, employee agreements, intellectual property, you name it.
Speaker 2 23:30
It’s like having your entire business put under a microscope. Under a microscope, exactly. So any advice for surviving due diligence.
Speaker 1 23:37
Be organized, be transparent, okay? And have all your documentation ready to go.
Speaker 2 23:41
And probably a good idea to have a strong cup of coffee on hand, or maybe something a little stronger. But seriously, due diligence is where having those legal and financial experts on your side is crucial. It’s crucial they can help you navigate the process and protect your interests. Protect your interests. Yeah, it’s like having a team of bodyguards for your business. A team of bodyguards. They can help you avoid pitfalls, avoid pitfalls, negotiate favorable terms, favorable terms.
Speaker 1 24:09
So we’ve covered a lot of ground in this episode from the importance of profitability, to building a strong team, a strong team navigating the intricacies of acquisitions, the intricacies of acquisitions, and we can’t forget Jason’s Elf on the Shelf story, the Elf on the Shelf. Yeah, it’s a reminder that sometimes the best opportunities come, yeah, in the most unexpected packages. In the most unexpected packages, absolutely. So before we wrap up part one, okay, what are some key takeaways?
Speaker 2 24:39
Key takeaways for our listeners, focus on building a profitable, sustainable agency, with a strong team, and a clear vision for the future, vision for the future. And if you’re considering selling, yeah, get your house in order. Get your house in order. Assemble a great team of advisors, and be prepared for the long but potentially rewarding journey of an acquisition.
Speaker 1 25:07
The journey of an acquisition.
Speaker 2 25:08
And most importantly, most importantly, never be afraid to say yes. Say yes to the next Elf on the Shelf, to the next Elf on the Shelf. Words To Live By.
