Selling isn’t, of course, a unique thought, especially these days. Here is some background and learning from the why and how I sold my advertising agency – Citrus. I had a plan and it worked.
A few weeks ago, I was interviewed by Jake Jorgovan on his Working Without Pants podcast about selling an advertising agency. You can listen to Selling Your Advertising Agency here. I thought that I was particularly smart that day. And open about why and how I sold my own advertising agency. Note, I have bought and sold three agencies and have counseled a few agencies about how they should do the same.
… Oh, Quickie update. My new 58-page ebook on how to sell your advertising agency is coming out in August. its a freebie. Email me if you want to know when it hits.
Go: How To Sell Your Advertising Agency.
First, a bit of my background so you know where I was coming from. Literally.
Peter, for anyone in the audience who doesn’t know who you are and what it is that you do, can you just give us a quick overview about who you are and your background?
Sure. Today I am a business development consultant for advertising agencies. That’s today.
I started life as a commercial advertising and editorial photographer in San Francisco, woke up one day and said, “I really don’t want to take photographs for other people.” I moved back to my hometown New York, started working at Dancer Fitzgerald Sample, which was a very large Mad Men-type agency. Our client list was bizarre, everything from General Mills to Proctor & Gamble, to Toyota and Nabisco. That agency was bought by Saatchi & Saatchi Advertising Worldwide.
I spent 16 years at Dancer and Saatchi. I worked in New York. I opened and ran the office in Minneapolis. I moved to London and worked across Europe. I ran business development in London and New York. When I came back to New York in ’94 I discovered the internet and went to work for the company that owns Conde Nast putting newspapers online. Did that for a few years, started another company called Active Buddy, which is similar in some ways to Siri as in understanding natural language. The platform was instant messaging. We were going to sell the company to Google, or Yahoo, or Microsoft. I would have had FU money. That didn’t happen, but I did get a good chunk when we sold the technology to Microsoft.
For some reason after the dot com bust, I woke up and said, “It’s time to move the family to Oregon,” and I bought an advertising agency out there called Ralston Group. We renamed it when we bought the design firm Citrus and added a couple of Nike AOR accounts. A few years later I woke up again and I said, “It’s time to sell the agency.” I could discuss the why and how’s in selling an agency if you want. I sold the agency. I now do three things in Mexico, one of which is to consult with advertising agencies around the world.
Why Did I Want To Sell My Agency?
Nice, that is an awesome and absolutely incredible story. And your headline on your website is very valid when I say, “I’m the most experienced advertising business development consultant.” As you clearly have got some years and track record in this and have done a ton of stuff with the big names. You’ve run your own agency. You’ve kind of been all around the field of things.
First of all, what was the why for you selling your agency? Why did you decide to do that versus continuing to run it like it is? Let’s start there because that a question I’m definitely curious about, and I know a lot of agency owners sometimes think about it.
Well, the why, I think it’s important to understand why you do anything. And at some point in the latter stages of owning the advertising agency, I ceased to have as much fun as I had had in the beginning. And a real catalyst for that was the 2007 – 2009 recession, which I think dramatically hurt the agency business in terms of profitability. Now let’s couple that with the growth of digital marketing where there are many, many new platforms to manage without commensurate billing, and I really lost a bit of love in the business when the business lost its level of profitability.
You have to remember that I started in the 15% commission days, and we were making bundles. I mean it was really a-go-go. There was a reason why there were mad men drinking wine and whiskey in their office and going out for long lunches and smoking cigarettes and cigars. And that really stopped in, let’s say the late 90s.
By 2009 I knew I had to reinvent my agency. I had done that a couple of times. I was going to reinvent it into a much smaller, much more hub, and spoke distributed agency staff model. And I just woke up one day and said, “You know, I just don’t want to do this again.”
How Did I Sell My Agency?
Nice, and so I guess then so you know that you kind of hit that point where you’re not wanting to rebuild it again, or you’re maybe ready for this next chapter. How did you actually go about that? Did you work with a business broker? Did you find someone who you thought would be a good acquire and actually kind of pair it there? All the question, it’s like, yeah, I’m curious around that of that process for you.
Well, I’m asked often about buying and selling an agency. I work with agencies on their strategy to build a valuable agency and then possibly sell it. So I’ve been all across that spectrum. I’ve bought a couple of agencies, sold a couple of agencies. And while I was at Saatchi, we ran our global agency acquisition campaign, so I was dealing with many new agencies brought into the Saatchi fold.
Back to Citrus. I think I was lucky because I had a great client base (Nike, Harrahs, Dr. Marten, Montana Lottery, and on) and, to a certain extent, that’s what people wanted – names and billings. When I woke up one day and said, “It’s time to sell the agency,” and I looked around, I knew I was not going to sell what was essentially a generalist agency based on Portland, Oregon to WPP. I didn’t have that fantasy.
But I did know that there were more “local” agencies in San Francisco, Portland, or Seattle that would want my client list and staff. To really cut to the end of the process, I managed to sell my agency to another agency in Portland that needed our cool clients, and a few other regional clients because they wanted to grow their agency. And the fastest way to grow an agency is to buy another one.
I started the process, and as I said, I knew the type of agency that was going to buy us. I hired an accountant, an advertising specialist accountant, to send out blind mail to a handful really, just a handful of agencies. I knew the guys that should buy me. Right? It was really very clear to me what the marketing approach would be for me – create awareness within the right group of agencies, and do not overprice the agency. I found a buyer fairly quickly.
So basically you went and you looked in like … this was a very targeted … You managed the process yourself. You just sought out the agencies that could be a good fit, could be a good buyer that you knew in the area. I guess with going and selling an agency, a lot of times one of the biggest challenges I know that a lot of agency owners or service businesses have is the connection and the tie to the owner. And I’m curious, how much had you removed yourself from the business at that point? Did you have to go with a year-long buyout, or what was the process? I guess how far had you removed yourself, and then what were those terms in your buyout?
I would say I was the leader of my agency. But I had not, and maybe I did this subconsciously, I did not position myself as the lead person for any account we owned. I knew all of the marketing folks at our clients, and I worked with them on business strategies when it was time for them to take a hard look at their strategic approach. But I wasn’t day-to-day, and I tried to set myself up so that if I actually exited, no one would miss me.
I took my ego out of the equation and that requires a certain type of egoless approach. By that stage of the game, I didn’t need to be loved.
My goal was to manage a profitable agency and to run our business development program, which is really where I put most of my energy. And, of course, when you run an agency, you’re dealing with your staff and want them to be productive and happy, and you’re dealing with a cost structure. That said, I tried to not make myself integral to any account.
For example, Nike, we had two great pieces of business from Nike. One was their major league baseball marketing program, which ran for about six months each year. And the other, which ran the other six months was their college marketing program. When I bought the small agency that had Nike as accounts, I kept that team I ‘bought’ in place. Nike saw me, but they didn’t need me.
I Bought Another Agency First.
Okay. Let’s go back a couple of years. So you actually acquired an agency on the buildup of this process as well, and then proceeded to sell it again?
Yeah. We were initially based in Bend, Oregon. We had a great client list and a good margin. My creative director partner was as good as anybody I’ve worked with globally. And that was the key reason to buy the agency. And I knew, based on the work and based on our client base that we could grow. I did make multiple attempts to try to find agencies to buy in San Francisco, Seattle, and Portland and settled on a design group, not necessarily an advertising agency, that worked very closely with Nike, very deep connection. And that worked out fabulous for everybody. Everybody was a winner.
I’m curious on the acquiring side of this and then on the other side of this like the actual selling. One of the things that I’ve heard I guess about agencies and sales and this is that a lot of times it’s hard even if the owner has removed themselves. It’s often so risky because if, say Nike or these big accounts do walk, you know, the level of risk in those kinds of acquisitions is just really high. And so I’ve heard that a lot of times the sale is almost equivalent to what is the contracts that you have locked in.
And I’m curious for you on the buying side or the being buying, how did that value come into play or that value come? Was it multiples on profit, or was it based on the contracts you have or just an arbitrary number? How did you guys kind of come to that?
Well, a couple of things, again, understand that I had been planning on selling for a while. And the good news was that I sold the agency to another agency that kept all of my staff, so keeping the staff in its place was a very important goal of mine. Did I think that was necessarily going to happen easily? No, but it did happen because we sold to a Portland agency. So the other agency purchased the people that ran those accounts.
I want to reiterate. I had multiple goals: sell and do something else; get a decent price but I wasn’t greedy; keep the clients happy and make sure that my guys were secure.
Stupidity Can Rule.
Allow a bit of digression. I’ll tell you a little side story from my agency consulting business.
I’d worked for a couple of years on and off on a consulting basis with a super-smart agency in Texas. The CEO called me up a few months ago and said, “Someone wants to buy us.” I said, “Great.”
We talked about it. I gave the business owner my perspective. The buyer hired another ‘expert’ consultant to help price the agency. Somebody, I would say more skilled in the accounting area than me. And unfortunately, his buyer agency client was given a piece of advice that I thought was absurd, which was to have the buyer and the current agency owner meet with the agency’s largest client before the sale to make sure that the agency’s largest client was comfortable with the sale.
That may sound great to the buyer, but I would never, as a seller, go to an existing client until the deal was essentially done (or, just done) and say I’m selling exiting and we’re moving your account to another agency. That red flag could get that client to wake up very early in the process and say, “I don’t like this. In fact, you know what, I’ve been thinking of searching for another agency anyway. I’m going to put the account up for review.” Obviously, I counseled the seller, my client, not to allow this to happen. It didn’t.
Back to my sale… Again, I went to the clients after the deal was done. A client like Nike. Another one was Providence Health and Services, which most people in the country don’t know. It’s five states of hospitals, 90,000 employees. And when I met with management at Nike and the hospital group, I simply said, “Nothing is going to change. In fact, it’ll get better. We’ll be a more profitable agency, more resources. These other guys are great. You’ve heard of them. They have healthcare experience.” I positioned it as a win-win for everybody. I did the same for the Montana Lottery.
And clients didn’t start walking for, I would say, two years after the sale- long after we inked the deal. And clients walked because clients walk, which is a great reason to have a business development program that runs 24/7. But it was a win-win for everybody. I was extremely pleased.
Greed? No. Realistic? Yes.
Now, let me say one other thing. I wasn’t greedy. Again, I talk to lots of agencies, and agency owners will say, “I want to sell for X”.
And I look at them and I say, “Well, would you buy you for X?” And they say, “Well, maybe not.” The key here is to be realistic. I wanted a nice way out. I wanted my employees to be happy. I wanted my clients to be happy. I sold the agency for a percentage of adjusted gross income, and those payouts were quarterly for three years. So I got a chunk at the beginning, but I got paid for three years.
Because of the buyout, it was without question in my interest to make sure the clients were happy. And, of course, I could talk to my ex-employees who now work for the new agency, but I didn’t have to. We were a well-oiled agency machine, and I knew that they would take care of the clients.
Alright, sounds awesome. So basically you structured out a payout over time. Did you do anything to protect yourself in that because you always run the risk of the other agency kind of messing things up or defaulting on the contract? Or did you just make sure you had someone that you knew you liked, and you trust, and you weren’t afraid of that might kind of mess some things ups? What are your thoughts there?
Well, there was total trust in new agency management. The gentleman that ran the agency was a friend. He had been running a high-quality agency for 20 years. There really weren’t a lot of elements of the deal that made me nervous.
I Had A Master Plan. I Had Personal Goals Beyond Advertising.
Now, let’s switch to me personally because when I talk to agency principles about how they manage their agency, I also try to talk about the softer side of their business – what they want personally. We can talk about numbers, we can talk about clients, we can talk about inbound and account-based marketing and get deeper into how they market their agency, but I also ask them, “What makes you happy? What do you want from the experience of owning your agency?” “What might you do after you sell?”
By the time I sold the agency, I had a plan. After I put it in my contracted handover for three months, I was going to go to Cambodia for a month and do a serious photography project. I reinvigorated my photography, remember I started life as a commercial photographer. I went to Phnom Penh and I also worked with children at a friend’s school. That was my break free month, right, 30 days in Cambodia.
I came back. I wrote a book about, this may sound strange, suicide, rational suicide. I’ve been wanting to write a book for a while. That was my training wheels book. I started the consultancy. I wrote a business development book called “The Levitan Pitch. Buy This Book. Win More Pitches”, which is a pitch book that I knew would be an element of my own marketing program for my business development consultancy.
I also invested in the cannabis industry. Remember this was about 2014. I photographed the marijuana industry early in the Portland days. I have two books on that.
But really, the bottom line was something fell into my lap. I didn’t state this earlier, when I sold the agency, a few agency friends said to me, “Can you help us market our agency?” So I had the market really put the idea of consultancy in my brain before I had developed that as an idea. There’s a need in the marketplace. People who knew me, I think, thought that I had a reasonably good skill set. Those are people that found me.
And, here I am today. I live in the coolest town in Mexico – San Miguel de Allende. I have a thriving advertising agency consultancy. And, I travel.
It all worked out because I had a plan. I got my price. Oh, and I have good luck too.
Call me up, send me an email. Take me up on my Corleone offer.