KYLE WIDRICK

Kyle Widrick: Ahead of the Curve

 

In this episode of Trunk Talks we speak with Kyle Widrick, Co--Founder & Chairman of Brand Value Accelerator (BVACCEL) about his role in founding, growing and positioning BVACCEL for a successful acquisition. Kyle is an experienced consumer sector investor and brand building professional, who specializes in early stage ventures, corporate strategy, business development and internationalization.

 

Discover in this Episode

 

  • The benefits of a niche service offering
  • Avoiding high client concentration
  • The mechanics of hiring a banker

The benefits of a niche service offering

Many agencies position themselves as a “full-service” offering with the assumption it will help them attract a wide range of clients, but often find this to be untrue. If an agency cannot offer all services advertised to a high level of quality, then the reputation and perceived value of the agency could be damaged.

With a niche business offering, clients and prospects will regard the business as an expert, which is especially true if the company is able dominate their niche like BVACCEL has achieved. By being recognized as an expert in the Shopify platform, they have built up tremendous credibility for their brand that has motivated a very large market to do business with them.

Positioning the business with a niche offering could also open up the agency to service opportunities that sit outside of the advertised offering. Clients who receive a fantastic experience in the niche specialty are likely to ask if you can assist in other services areas, giving access to additional revenue streams that the company do not need to advertise or position for.

Avoiding high client concentration

As discussed in earlier episodes, high client concentration can have negative effects on the valuation. A general rule holds that if any client accounts for 10% or more of revenue or if the largest five clients account for 25% or more of the revenue, the business has a high customer concentration.

Some industries naturally have higher client concentration levels than others, and project based businesses like advertising do tend to have a higher concentration than other businesses. That being said, what makes BVACCL unique is that they have managed to create a business model that has enabled them to have low customer concentration in a vertical that traditionally has high customer concentration.

The mechanics of hiring a banker

When approaching an investment bank, large agencies, agencies with more than $30 million in revenue, will be educated on the pros/cons of pursuing a transaction in the current market. Smaller agencies have a much harder decision before approaching a banker as there are a lot of things to consider. Bankers typically require a retainer that requires upfront payment and varies in the range of $10K to $100K depending on the size of the business. The total payment charged will be based on a percentage of the sale and will have minimum. This makes the percent fee charged by the banker much higher for a smaller agency if they do not exceed the minimum.

For owners busy building their agency, bankers will manage the whole process and put together a pitch deck at a level of sophistication that brings the right buyers. It can be difficult to run this this process simultaneously to building the business - one of the many values a banker brings.

Kyle has not engaged a banker at the moment, but is weighing these factors as he and his partner decide. In the meantime, they are focused on maintaining growth and margins to provide flexibility to drive the sale process.

Lessons From Trunk

    • Raising too much capital can bring unnecessary pressure on the company to deliver high returns vs focusing on efficiency, profitability and creating a long term brand.
    • A 20% EBITDA margin is the threshold to receive the most value during an agency transaction and significantly higher margins could cause concern over reinvestment back into the business.
    • An investment bank will look for those 20% EBITDA margins, recurring revenue, and consistent revenue growth during the diligence process.

 

 

                                                 

 

This episode is sponsored by Julius, your influencer marketing software.

Julius is an influencer marketing platform that provides marketers with the data & campaign management tools required to organize a successful influencer marketing strategy

Share this podcast:

Subscribe for updates and new content!

OTHER EPISODES