In this episode of Trunk Talks, we speak with the Chief Innovation Officer of Brand Connections, about his agency acquisition experience. The Texas native founded his own agency, PIE Advertising when he was just twenty six and lead the creative process for some of the country’s biggest challenger brands. Soon a key business partner, Brand Connections, acquired PIE Advertising. Today, Brad serves as one of the key members of the Brand Connections executive team.
Brad discusses the importance of launching an agency with a clear exit strategy. This helps keep the management focused on building enterprise value for the company. Agency owners often make their financials as tax efficient as possible, rather than being EBITDA focused. Focusing on EBITDA increases the profitability of the business and drives long term value for the agency. Productizing technologies and monetizing processes also creates value as products are valued differently than tools. For additional information on the difference in valuation between products and tools, see episode one of the podcast. Building the agency for the long term with an exit strategy in mind helps maximize enterprise value over time.
Agency owners should have an open dialogue with the acquiror on all aspects of the business that they would like to maintain. Negotiating and keeping key aspects of the business in place allows the “secret sauce” of the agency to stay within the organization. Owners should prioritize the important points and push hard for those items. These could include vacation policies, tenure agreements, titles, and salary levels while potentially giving up on smaller items like work attire and timing. Owners should then prepare their employees to expect some changes and work with them to retain the top talent in the agency. It’s important to be realistic and understand where the compromises will come.
As a senior executive, there is a limited number of people to counsel with or bounce ideas off of, but working with a private equity firm provides access to additional expertise and advice. Having the right private equity partner encourages owners to be more disciplined in managing their business and keep financials in better shape. The transparency demanded by a private equity firm also requires owners to be accountable to another party and justify key business decisions with supporting data. This accountability helps owners make the best decision to drive growth and create value.
Julius is an influencer marketing platform that provides marketers with the data & campaign management tools required to organize a successful influencer marketing strategy
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