What Happens After You Sell Your Agency?
The day has finally arrived. After many months of decision-making and discussions that gradually morphed into due diligence, the deal is now done. Congratulations! A bottle of celebratory champagne might be in order. However, your work is not over just yet. So, what happens next? The handover that takes place once the paperwork is complete is not a one-size-fits-all period. Based on our experiences here at Merge, two scenarios are most common. Let’s take a closer look at both to make sure you have a detailed answer to the question, “What happens after you sell your agency?”
Scenario 1: Signed, Sealed, & Delivered
Transitions are rarely easy, whether personal or professional. We’ve encountered numerous reasons to keep this period to a minimum, from job offers to relocations and family planning. Completing a sale quickly and transitioning within the minimum required time is often the only way to go.
However, that minimum is typically fixed at 90 days, which is included in any viable deal aiming for a successful agency sale. These 90 days are compensated by the sale of the agency. Staying on beyond this period means you’re making yourself available for additional duties, and any compensation after the standard 90 days becomes a matter of negotiation.
Generally speaking, if you want to be completely out after the 90-day transition period, you’re likely to receive less favorable terms at closing. Standard deal terms usually involve a combination of cash at close, seller financing, and a non-guaranteed earn-out based on the continued successful performance of the business. With limited assurance that the business will continue to operate successfully without you, buyers are more likely to reduce the cash at close and increase the non-guaranteed earn-out.
The good news is that we are currently in a seller’s market. This means there’s a higher likelihood of finding a buyer who will accept an owner looking to sell without staying beyond the standard 90 days. However, if you want top dollar for your agency, consider selling it before you need to be officially out the door, which brings us to option 2.
Scenario 2: The Deal After Tomorrow
While there may be good reasons for not being able to commit to a long-haul transition, it is the option that generally yields better results. Owners who can commit to a full year of oversight after signing the dotted line invariably tick more of the essential boxes from a buyer’s perspective.
First, owners who stick around offer buyers a sense of security that can make all the difference. It means the owner will be present long enough to manage unforeseen issues that might not all arise in the first 90 days. It also means having the necessary experience and leadership available throughout the business’s seasonal fluctuations.
Next, the full-year option virtually guarantees that no stone is left unturned before the handover is complete. Managing new internal dynamics and assuring key client accounts are secured can be challenging within just 90 days. A year-long commitment ensures a more thorough transition.
Finally, offering your services for the full year after an agency sale broadens the pool of potential buyers. Providing greater peace of mind and requiring less immediate fit ensures less time is needed at the front end of the deal.
All Aboard
Last but not least, think of your team. An agency sale isn’t just between an owner and a buyer. The people who helped you build the agency that is now becoming someone else’s dream will benefit from having the founding DNA around for a longer transition period, ensuring it is passed on properly. Want to discuss this further? Connect with us and let’s schedule a time to chat🙂
