January 14, 2017 - No Comments!

How a defined offering makes an agency more valuable

By Barry Dudley and Tony Walford from Green Square.

As a mergers and acquisitions specialist, our view of what makes an agency valuable relates to the price a potential acquirer may be prepared to pay for it.

One of the first questions we ask when we meet agency owners is "What does your business do?".  The response tends to go one of three ways:

1. "We do all sorts of things / we're integrated / we're full service"

2. "We're a [insert buzz word of the day – e.g performance / content / big data...] business"

3. We get a succinct and compelling answer with a clear proposition.

Rarely do we get a 3, more often its 1 or 2.

Integrated and full-service are terms that should be used carefully.  The inference is that you can deliver whatever is asked of you. But can you really? And do you?

Can an agency with, say, 20-30 people credibly have the expertise to cover the full marcomms spectrum? Is it likely to have the talent, systems, processes and tools to create and deliver a truly fully integrated campaign across direct, digital and traditional channels, involvjng search and CRM at equal levels of excellence? Let’s face it, it’s unlikely. Once you get north of 50 people, the integrated story becomes more credible but there aren’t many independents operating at that level.

And what of ‘do you’?  This is where hard facts often paint a different picture between what you say and what you actually do.  We always ask for an analysis of an agency’s revenue by the different types of service it provides.  It is rare the hard data supports the positioning of being integrated or full-service. More often it demonstrates that the key service is X, but a bit of Y and Z is added to the mix and maybe some A, B and C here and there. Case studies are the things that normally truly define the proposition in our eyes.

It’s very easy to be client led. If a client wants a service and you have the capability of delivering it, then why not? The reality is doing so can be distracting and by having multiple offerings it makes your proposition difficult to understand and to buy – both from a client perspective and an acquirer one.

The buzzword agencies are often exciting and in theory should fall into category 3.  However, if a buzzword is being used to describe an agency’s offer then it needs to ensure it is truly delivering that service at its core and not just bringing it to the fore because it is in vogue.  Those that are most convincing are those that have been built from the outset to deliver a specific service, address a specific niche or have properly evolved themselves towards doing so.

To quote the Grateful Dead’s Jerry Garcia – “It’s no longer good enough to be the best of the best, you have to be the only one doing what you do”. To quote vocalist James Hetfield opening the headliner slot at Reading this year “We’re Metallica and this is what we do!”

It’s all about being clear and concise, doing what you say you do and succinctly marketing this core expertise.

What we find acquirers value most is a strong and clear proposition supported by a solid marketing and new business plan. Indeed, once they have garnered market traction, those agencies with the strongest propositions generally find the majority of their work is referred. It’s about your product being easy to understand and easy to buy. If existing clients are able to easily sell you to others, there is no better proof of clear positioning than that.

When you’ve got that two minute elevator pitch with a potential acquirer, you need to be confident you will be able to explain to them exactly what you do, how you do it, who you do it for and make them excited enough to want to acquire your business. Having a clear proposition makes this a hell of a lot simpler.

Published by: admin in How to

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