Timing is everything when it comes to selling your ad agency

The decision to sell your agency is a big one. If you’re like most agency owners, you’ve put years of time, energy, and love into building your business, perhaps starting completely from scratch. It’s not a decision to make lightly. Eventually though, something will change—you might want to retire, or face a change in personal circumstances, or simply desire to move on to new ventures. I’ve been in this position myself (I sold my agency just over 10 years ago) and I regularly talk to business owners who, for a wide range of reasons, are contemplating an exit.

One question pops up in these conversations more than any other: when is the best time to sell? 

The answer isn’t always straightforward.

It can depend on a variety of factors, and the potential financial implications of a deal are only one of them you’ll need to consider. That said, there are a few scenarios in which selling often makes a lot of sense.

The first of these is when you have a few years left before retirement. It's important not to leave the decision to sell until the moment you’re ready to retire, as the process of selling an agency can take anywhere from three to six months, and sometimes longer. In addition, buyers will often want the seller to stay on for two to three years after the sale to ensure a smooth transition of the business, retain key staff, and facilitate the transfer of institutional knowledge.

The second optimal scenario is one in which you have real clarity on your agency’s financial future. For example, if your largest contract is ending in a few months, now might not be the right time to be negotiating a deal (and potential buyers might be hesitant to do so). Instead, it's best to successfully recompete the contract and then go to market immediately following the award. This way, you'll have a clear picture of your future revenue stream, making your business more attractive to potential buyers. 

Lastly, you probably don’t want to make a deal when the executive team is in flux. When you have a strong team in place that can assume a leadership role and help with the transition of the business, it’s more valuable. This factor is especially important to consider if you’re hoping to step away from your agency entirely (or at least minimize your involvement). Buyers will want to know that the business can continue to operate smoothly when you’re not around to keep things running.

There will be plenty of other factors to consider when selling your agency—including the state of the market, the economic climate, and the overall health of your business. But if you’re a few years away from retirement, clear on your agency’s financial future, and confident in your team, it could be a good time to look for buyers. 

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Mike Kapetanovic is a former ad agency president. He works with ad agencies on their agency business development as well as advises on M&A.