In this episode of Trunk Talks we speak to George Swisher, Founder and CEO of LiiRN about his extensive digital agency acquisition experience. Throughout his career, he has been involved in 100+ acquisitions, some as an owner and many as a strategic advisor. The conversation highlights a number of important topics for agency owners, including the dangers of 50/50 ownership partnerships, the importance of using business financials to enhance enterprise value, and the key negotiating points that every agency owner needs to be armed with.
With over twenty years of experience, George has a proven record of successfully founding and scaling digital agencies. He specializes in building them from the ground up, guiding mergers and acqusitions and helping with turnarounds. He recently founded and launched LiiRN, a technology platform that helps agency stakeholders better understand and interpret their business.
The best way to structure your agency is not always a 50/50 partnerships. George discusses his experience with 50/50 partnerships and shares his view on other ways to structure a partnership. The best partnership starts with determining what the partners are looking for and finding how to align them. Depending on the needs, wants and dreams of the partners, different deals can be structured for each partner. It can be dangerous to put the same deal together for one partner looking to run a lifestyle business and the other looking to grow the agency to $100 million.
There are several factors to consider at the beginning of the process to avoid such a scenario such as who is taking the most risk, who is bringing in the most revenue, what is the exit plan and who has the most responsibility. By discussing these factors at the beginning of the deal process, an agreement can be reached that aligns all parties. In a 50/50 partnership, it can be difficult to empower a true leader of the business. The partner taking the most risk should ultimately have the final say.
George speaks to bringing on a financial consultant to help build your financials to sell versus using tax financials. Agencies generally have bookkeepers that structure tax prepared financials that minimizes the agency’s tax burden, but also minimizes the profit in the business. By preparing operational financials that maximize the agency’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and showcases the operating performance of the business.
Investors are looking for financial processes in place that are airtight and built to scale with the business. This brings confidence to the revenue, EBITDA, and cash flow projections that ultimately drive the sale price of the agency.
Agency owners should be well prepared going into the negotiations to protect their interests and the interests of the agency. George highlights a number of points that agency owners may not know they can negotiate. Key points include:
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