Alex Halbur
Managing Partner
Prosper Group

If an agency owner is in her 60s, whether it’s discussed openly or not, everyone is talking about what’s going to happen when she decides to retire. All of the agency’s employees are concerned about their future, their families, and their salaries.

The agency owner is ready to transition to the next phase of life, but she needs to extract a certain amount of wealth from the business in order to secure the lifestyle she wants for herself and her family into the future.

Key for both the owner and the agency’s senior team is plenty of planning – we recommend five years – and good communication about the plan. The good news for all is that the M&A space has been fairly hot for the past few years.

At Prosper Group we work exclusively with independent agency owners.  We help them achieve their life ambitions by ensuring their business drives the wealth generation they need to live the life they want to live, and their departure doesn’t upset the brand, the business, the employees or the clients they have worked so hard to build.

The agency marketplace has two kinds of buyers: strategic and value.  The strategic buyers look for an agency that will give them strategic leverage, either adding to the expertise they are already strong in or expanding into new areas and industries.  These buyers tend to be the big consultancies, the holding companies, and private equity firms.  They are usually willing to pay more for the strategic advantages they have identified in a given agency. The value buyer is often another independent agency also looking to expand but unable to pay a premium price.

To achieve a successful exit at the best possible price, agencies need a five-year period.  It could be done in less, but for that to happen, everything has to go perfectly and we don’t see that very often.  We work with the owner in all aspects of agency performance to make sure that maximum value is achieved.

It’s important to allow time along the way — time for the owner to figure out what they need out of the exit to make it work for them; time to work with existing talent to secure them during the transition period; time to identify the right successor; time for a period of transition for the old team to pull back and the new team to take over; and finally time to adjust to any setbacks.

The first step is working with an owner to develop a timeline, as well as assess the current financial position and determine future lifestyle needs.  Second, we work closely with the owner to evaluate senior talent and to craft compensation packages that will serve as retention tools during the exit period.  It is crucial to be open and transparent through this process.  Losing important talent can significantly delay the exit.

We believe transparency is important once the owner has made their decision and we begin to set about find a successor.  We make sure to address the needs and concerns of each of the members of the senior team.  We want everyone to feel they are a valued part of the process.  Working very closely with the owner, we evaluate all of the potential leaders and possible successors develop compensation schemes for all key talent.  It’s important to know early in the process whether the chosen successor is interested, that they are the right choice.

Your exit should be an exciting time for you and your family, and an opportunity for your vision to remain in place as the agency moves into its next phase.  Make sure to leave yourself time to fashion an exit that looks like a natural evolution of the agency, have a written plan for yourself and the organization, and lock your talent in with creative compensation.

To hear more, listen to Alex Halbur’s episode on the Agencies of the Future podcast.