6 Simple Lessons I Learned Selling My SEO Agency

For 10+ years I ran a digital marketing agency that specialized in SEO. Then came the idea for MySiteAuditor. It took off way faster than I expected and before long, it was all I could think about. A SaaS with a fast growing MRR, little to no overheard, and zero customer acquisition costs looked so appealing compared to a team of employees, office politics, clients, and endless sales meetings. I knew what I had to do. I needed to prepare my agency for acquisition.

This was an exciting and crazy time in my life so I’ll have to go into more detail in future posts. For now, I’ll just share a few unexpected lessons I learned about the acquisition process.

First, you should know that this whole thing almost didn’t happen. I walked away from negotiations out of frustration, only to later come back to the table with less leverage.

Had I known these six simple lessons, maybe the process would have been a lot smoother and more valuable on my end.

Lesson 1:
Asset Purchase Agreements

At the time, I didn’t know what an APA was, and because of that, I could have missed out on this huge opportunity.

An APA (Asset Purchase Agreement) is type of acquisition that lets the buyer purchase all the company assets, but not the liabilities. This includes an itemized list of things like the logo, office equipment, open client contracts, and other brand assets.

What’s not included are the liabilities.

This protects the buyer from acquiring any unknown liabilities.

While I was extremely transparent during the process there was some concern for possible open liabilities. The APA, made this a non issue.

For example, a few months prior, I had a lawyer trolling me for a $5,000 payment for alleged unauthorized use of his client’s stock photo.

The APA made it a non issue. After the APA was signed, I dissolved my LLC, protecting myself from any outstanding liabilities that could come back to haunt me.

Lesson 2:
The value of your agency is not what you think.

Your baby is always going to be more beautiful to you than to the rest of the world. Don’t get hung up on this. Keep an open-mind. I walked way mid-negotiation because I was being stubborn and closed minded.

Get a second and third opinion, and think long and hard about the actual numbers. Unless you’re an industry name or household name like Moz or Facebook, there’s very little value in your actual brand.

The value is in the numbers.

And if you think you’re getting 10x for your company, think again. I got just under 3x, which was excellent for a service provider in the SEO and web design industry.

Lesson 3:
Have your books ready!

I almost lost the deal because my books weren’t ready to be reviewed. My buyer got very nervous when it took me a couple weeks to send my books over.

I have to admit they were not ready, and what I had was a mess. My accountant and I worked tirelessly to clean things up and make them presentable for the buyer, thus saving the deal.

Keep in mind, your books need to be ready for review for the last 2-3 years, not just the past year.

Lesson 4:
Lawyers don’t have to be expensive.

I remember scheduling a meeting about this potential acquisition with an attorney. I’m pretty sure all he heard and saw were dollar signs because when I got to his office he had two other attorneys sitting in the room ready to over everything.

At the end the meeting he told me this would cost between $30,000 and $40,000.

…I got a new lawyer.

I found a young attorney with her own practice who came highly recommended. She was perfect. She was very transparent about the entire process. She described how she would re-purpose an existing APA contract template to save money, and she put me at ease by telling me how simple and straight forward an APA can be.

All my legal fees ended up being less than $2,000.

Lesson 5:
Capital Gains Tax

You’re going to have to pay taxes on the sale of your company. So, talk to your attorney and accountant about how you will be taxed and what your options are.

Imagine selling your company for $300,000. Would you rather pay 15% or 30% in taxes?

A buyer could structure the purchase of your company so that you’re taxed as ordinary income, which has a much higher rate than capital gains.

That’s why you need to ask and learn.

Lesson 6:
Get to know your buyer.

I met with my buyer at least 8 times over a six month period. We had coffee, beers, dinner, and finally champagne. I can’t stress this enough. Get to know your buyer and go with your gut, especially if you’re expecting future payouts.

What do you think?

Are you thinking about selling your agency? If so, what else would you like to know? Please tell me in the comments below.

Thanks for reading!