Buying a marketing agency vs start your own

Marketing professionals looking for a new challenge often turn to running their own business. It gives you the freedom and flexibility to take ownership of your career path, and the possibility to earn a better wage than in an employed role.

If you’re thinking about starting an agency, you probably relish the additional variety that business ownership brings to your role, offering challenges like management, leadership, and mentoring.

So if that’s you, and you’re ready to own an agency, what’s the best route? Should you buy an existing agency, or start your own from scratch? In this article, we look at the main things to consider from an accountancy perspective when you’re making your decision.

Initial Costs

When you buy an agency, you pay the purchase price for the business. That’s the obvious part. But don’t forget that you’ll incur a number of other significant costs in the process. Professional fees can rack up for:

Accountants, who value the business and conduct the financial due diligence.
Lawyers, who draft the legal documents to transfer ownership and conduct the legal due diligence.
Brokers, who match interested buyers with suitable sellers.

All in all, you’re looking at significant initial expenditure. The good news is that you don’t necessarily need all the money in your bank account right now. You should be able to get a loan or other forms of finance to help you with the costs.

Starting your own agency is likely to be the cheaper option in terms of initial costs. Your initial outlays will be investing in assets to get you started; things like office equipment, software, a website etc. You’ll also need to find a way to pay your staff from day one, even if you don’t yet have a steady stream of revenue.

Again, there are ways to finance this. As a start-up you can seek funding from investors that can cover the costs of the early days. Or a business bank loan can give you a lump sum to begin with. Don’t forget that you’ll need a comprehensive business case to secure finance. We can help you prepare a business case if you don’t already have one.

The first few years

When it comes to the first few years, you set yourself up for a slightly easier ride if you buy an agency. The company already has an established track record, and along with that comes its reputation and goodwill. Perhaps they even have a loyal social media following, a successful podcast, and well-read blog. Those things take time to build, and when you buy the business it’s served up to you on a plate.

That’s factored into the price you pay for the business, but it also makes your first few years a little smoother. People know your name, they trust what you do, and you’ll continue to attract clients without too much additional work. The previous years’ accounts will help you forecast profitability, so there’s more predictability in the business from the start.

Of course, predictability is not guaranteed. There’s always a risk that the talented, hard-working people that made the agency successful will leave. A change in management can be unsettling, and some of the existing employees may see it as a good time to move on.

By starting your own marketing agency, you can really put your own stamp on it. You can focus on the work you enjoy the most, and you have the flexibility to take it in any direction you please. It’s a blank slate to create the workplace you always dreamed of.

In terms of finances, the first few years can be tricky for start-ups. Even as seasoned marketing professionals, it can take time to build the client base that makes sufficient profit. It might take some time to settle on your charging structures and work out precisely what your overheads are. That means that cashflow can be a challenge in the first few years.

Your retirement plans

Given the time it takes to move from the start-up phase into an established, profitable business, you probably want at least 5-10 years to invest in the business and grow it. With that in mind, if you want to retire in the next few years, starting up your own agency is a higher risk than buying one.

However, if you have a few more years to play with, your business can become a lucrative asset that will set you up for retirement when you come to sell it. Putting the time and effort in now to build the business can translate into a viable pension plan for your future.

Key reasons to buy an agency

We’ve explored some of the financial reasons why you might buy an agency. What other strategic issues inform a decision to buy?

One of the main reasons is scalability. Buying an established business makes it much easier to grow quickly. With the right blend of talent, hard work and business nous, you can significantly increase your profits. You’re not driving momentum from a standing start, so growth can be swift and substantial.

If you already own a marketing agency, then buying another agency is one of the quickest ways to grow. The target agency expands your client base, and your geographical reach, building your reputation and the value in your brand and goodwill. You may choose to buy a direct competitor, in which case you cleverly reduce your competition at the same time.

Key reasons to start your own

Starting your own business allows you the freedom to create a new brand, drive the direction, and shape the vision and values. It’s exciting! Especially for marketeers – you do this all the time for your clients and you’re experts in creating brands. It’s no wonder that marketeers create successful agencies.

Whether you want to buy an agency, or start your own, you need a strategy to manage the risks, raise finances and manage cashflow. If you’d like an initial chat to discuss your options, please get in touch with us.