By Rick Gould, CPA, JD
Every PR business is ultimately for sale. The fact that we are still in a downturn makes it even more challenging. Banks aren’t lending. There are multiples more sellers than buyers. Buyers that are active and manage to obtain credit are buying quality firms strategically- for specialty, for location, or for intellectual capital.
So what can you do NOW if selling your firm is even remotely an eventual goal? Follow these 10 tips and you will be able to successfully prepare end enter negotiations from a position of strength.
1. Start planning early.
Get outside counsel to learn the process and what you will ultimately need to do prior to discussions with a buyer.
2. Get your financials in order.
Be sure to use a reputable CPA firm and request they do a review report. This is short of an expensive audit but at a higher level than a basic compilation. Never believe you can ever substitute your business tax returns for a signed-off CPA report. A buyer will politely walk away.
3. Be realistic as to price expectations.
There are many perceived formulas circulating in the industry, but there are only a handful that are industry specific and acceptable. Get a professional valuation of your business.
4. Have a strong second tier of management.
This is critical in supporting value. If a firm is just an owner and a bunch of AE’s it substantially reduces value. Buyers always look beyond the top tier of management, beyond the CEO, beyond the principals.
5. Have systems in place.
Accounting, time management and workflow utilization systems are imperative for maximizing efficiency and profitability. They also adds “perception points.”
6. Expect an “earnout period”.
Be prepared to be paid out over 3-5 years based on agreed-to targets and goals. This earnout method is widely used and is equitable to both buyer and seller.
7. Have non-compete, non-solicitation agreements in place with key staff.
Include them in the sale- as you get a check they get a check. Thin is very incentivizing.
8. Have an integration plan.
Show how you would divide tasks post-sale, integrating your staff and those staff members and technologies of the buyer.
9. Be mindful of your lease.
Don’t renew your lease, or worst case renew it for a short-term. Try to go to month to month if your lease expires.
10. Write a business plan.
A business plan is a mission-critical, challenging project. You may need professional help preparing one. Show how you would use your staff and resources after the sale. It will always add “perception points” with a buyer. To do a thorough business plan you are required to think about the future. It makes you think about staffing, technology and the competition. It is a roadmap. It is truly an art to write a quality business plan. If you already have one for your firm, just a little updating will do the trick. Do so and watch a potential buyer light up and want to further discussions to buy your firm.
Tuesday, June 1, 2010
Wednesday, March 3, 2010
Growth Momentum, Circa 2010
By Rick Gould, CPA, JD
As we see the economic uncertainty of 2009 subside, we slowly exit the recession that has hammered the PR industry for the past 18 months. Now is the time to plan for a period of growth. Many firms saw their revenues cut in half over the last year, a painful and humbling experience.
Set targets, and set goals for growth in revenues today. Growth in revenues, if managed carefully, will beget growth to the bottom line. Looking at historical organic growth rates and projecting them out to the future should be a high priority.
Growth Momentum best describes this kind of economic recovery activity. This kind of thinking will positively drive your strategy. Is there a niche you would like to try (i.e. Healthcare, Crisis, Public Affairs etc)? The growth that most matters is the growth in the value of your firm. Just growing the top line will generally not increase value. Growing the bottom-line is the key to growing value.
Growth Momentum also has risk: the risk of growing in revenue size and staff with a negative effect on the bottom line. Economies of scale do not automatically occur unless this momentum is managed judiciously and effectively.
My blogs and messages keep coming back to our Annual Benchmarking Study. Industry benchmarks closely managed in relation to your actual stats provide the utmost critical tool to monitor and manage your Growth Momentum.
Most firms want to grow, but are unsure about how to best approach and manage the process. New challenges, new opportunities, and increased depth of services and staff are all contributing variables to growth. Growth can be a careful, measured approach or it can be a careless, emotionally driven one. Which approach do you think maximizes a firms’ value and price tag when the agency principal wants to monetize this valuable asset?
Larger firms that consistently surpass industry benchmarks possess the value and price-increasing intangibles in the valuation of their firm when they are in play to be sold. This will further drive growth momentum.
By adopting a culture of Growth Momentum and managing via benchmarking, firms will inherently evolve to keep staff motivated and attract new clients. Growing, successful firms that also exhibit top quality service and value are the ones that will survive the economic uncertainty.
Your starting point to launch this concept and to adopt a culture of Growth Momentum is to participate in our Best Practices Benchmarking Survey, being distributed on Monday, March 1. By doing so, you will be one of the first to receive the full survey report and findings once it is released. This report will outline the critical industry benchmarks you need to be following to maximize your economic recovery activities.
StevensGouldPincus 2010 Benchmarking Survey
As we see the economic uncertainty of 2009 subside, we slowly exit the recession that has hammered the PR industry for the past 18 months. Now is the time to plan for a period of growth. Many firms saw their revenues cut in half over the last year, a painful and humbling experience.
Set targets, and set goals for growth in revenues today. Growth in revenues, if managed carefully, will beget growth to the bottom line. Looking at historical organic growth rates and projecting them out to the future should be a high priority.
Growth Momentum best describes this kind of economic recovery activity. This kind of thinking will positively drive your strategy. Is there a niche you would like to try (i.e. Healthcare, Crisis, Public Affairs etc)? The growth that most matters is the growth in the value of your firm. Just growing the top line will generally not increase value. Growing the bottom-line is the key to growing value.
Growth Momentum also has risk: the risk of growing in revenue size and staff with a negative effect on the bottom line. Economies of scale do not automatically occur unless this momentum is managed judiciously and effectively.
My blogs and messages keep coming back to our Annual Benchmarking Study. Industry benchmarks closely managed in relation to your actual stats provide the utmost critical tool to monitor and manage your Growth Momentum.
Most firms want to grow, but are unsure about how to best approach and manage the process. New challenges, new opportunities, and increased depth of services and staff are all contributing variables to growth. Growth can be a careful, measured approach or it can be a careless, emotionally driven one. Which approach do you think maximizes a firms’ value and price tag when the agency principal wants to monetize this valuable asset?
Larger firms that consistently surpass industry benchmarks possess the value and price-increasing intangibles in the valuation of their firm when they are in play to be sold. This will further drive growth momentum.
By adopting a culture of Growth Momentum and managing via benchmarking, firms will inherently evolve to keep staff motivated and attract new clients. Growing, successful firms that also exhibit top quality service and value are the ones that will survive the economic uncertainty.
Your starting point to launch this concept and to adopt a culture of Growth Momentum is to participate in our Best Practices Benchmarking Survey, being distributed on Monday, March 1. By doing so, you will be one of the first to receive the full survey report and findings once it is released. This report will outline the critical industry benchmarks you need to be following to maximize your economic recovery activities.
StevensGouldPincus 2010 Benchmarking Survey
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