In this episode of the Duct Tape Marketing Podcast, I interview Amanda Dixon. Amanda is the Co-founder at Barney an M&A firm that specializes in the digital marketing space. She’s also a Forbes 40 under 40 award recipient.
Selling your agency in the digital space can be a hard area to navigate. Amanda Dixon found it difficult to find an M&A advisor who understood that landscape when she went to sell her own business. Since 2015, her company, Barney, has guided over 150 media, marketing & tech companies through acquisitions. In this episode, she’s sharing how she’s helped many entrepreneurs buy and sell businesses.
Questions I ask Amanda Dixon:
- [1:14] What’s the story behind your company name?
- [1:57] Could you tell us about your origin story and how you got started down this path?
- [2:55] Is there anything unique to the digital agency space or the digital space in general when it comes to selling in comparison to a company with tangible assets like a roofing company for example?
- [3:54] If someone stumbles upon you and what you do, and they’re ready to sell their agency, what is the first step?
- [5:00] How do you put a tangible value on digital assets like a methodology or framework?
- [6:33] Is there a way to value future growth?
- [7:47] Is there a right time or right size or sweet spot for agencies?
- [10:25] Are you seeing anybody selling parts of their companies rather than an entire acquisition?
- [11:19] A very common model today is people are outsourcing a lot of the implementation fulfillment, does that make it actually harder to sell?
- [12:00] Could you talk a little bit about the consultant versus agency model – is that harder to sell?
- [14:12] Do you have a success story that you can share?
- [16:06] Does hiring an advisor also come with a team of legal and financial advisors? Or do you have to find that outside of an advisor?
- [17:49] Have you ever experienced a transaction where a Founder sold the company to their existing team?
- [18:35] Could you tell people where we could find you and your work?
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John Jantsch (00:47): Hello, and welcome to another episode of the duct tape marketing podcast. This is John Jantsch and my guest today is Amanda Dixon. She's the co-founder at Barney, an M & A firm that specializes in the digital marketing space. She's also a Forbes 40 under 40 award recipient. And we're gonna talk today about helping entrepreneurs buy and sell their agencies. So Amanda, welcome to the show.
Amanda Dixon (01:11): Thanks for having me, John. This is great.
John Jantsch (01:14): So I have to start with the name. So, you know, I, I have kids that are in their thirties and I'm envisioning a purple dinosaur that I did a a lot of watching with, but I guess there's also Smith Barney, which is certainly in the finance space, but I'm sure you have and Barney
Amanda Dixon (01:29): The store.
John Jantsch (01:29): Oh, right, right, right. So, so hopefully there's a story or I'm guessing there is, you
Amanda Dixon (01:33): Know what, there is not a story, but I need to make one up because everyone asks the story is we needed a name and a domain. And I think it was $14 on GoDaddy. So that's what we ended up with corporate, but playful.
John Jantsch (01:49): Yeah. Yeah. We are barney.com in fact, was the URL that you secured. So your origin story, at least I dove into a little bit is you were like a lot of people, you had something you tried to get something done and couldn't so you thought, oh, go do that myself. So yeah. You had an agency and, and sold that agency or, or somehow related. Uh, tell me a little bit about
Amanda Dixon (02:12): That story. Exactly. Yeah. Not necessarily marketing services, a tech platform that, that sold and the process, this was seven years ago. The process to sell was brutal. I was pregnant with my daughter time. So there was a definitive end date when I wanted this process to be done. And I understood a really tough time finding representation that understood the digital space. And also, you know, was it gonna charge me a $50,000 a month retainer for me, the dollar amount of the transaction was so life changing, but for the markets and for the large scale M and a world, it wasn't a blip on the radar screen. So yeah, I just recognized, gosh, there's this huge gap above a business broker below an investment banker. That's just living in, uh, no man's land.
John Jantsch (02:55): I, is there anything unique to the marketing space, the digital agency space or the digital space in general, that kind of makes, you know, a disconnect between people that are also selling, you know, roofing companies a hundred percent.
Amanda Dixon (03:10): Yeah. I mean, in the agency space, there's no tangible assets. You're selling relationships with people. You're selling your culture, you're selling your client list, you're selling your business model, but that's it, you have no tangible also, you know, agencies, don't typically service clients in a localized market. Agencies can service clients all over the world. We may see them niche down based on the type of industry that they're in, you know, that they specialize in. They may just do PPC or just do SEO or just do creative, but they're all over the, the country. So we just found that folks that do know how to sell construction companies on a localized, on a localized scale, just don't have the buyer pool to attract a national, you know, a national buyer who's interested in the digital ecosystem.
John Jantsch (03:54): So let's say somebody stumbles upon you and what you do, or somebody tells them about what you and their first thing is. Okay. I'm, you know, I'm ready to sell my, what do you have to know? What do you have to start unpacking? Yeah. To really cause I, everybody wants to sell right. Everybody. Overvalues what it's worth expects the big pay day. So, so how do you have to start walking back to reality?
Amanda Dixon (04:15): Yeah. So I always joke with people, but it's one actually 100% serious. My job here in and our team's job is really to set realistic expectations across the board with buyers and with sellers. So the first thing we do is we've gotta get on the same page with evaluation as a firm, we will always do evaluation at no cost to just get on the same page and say, this is what your business is worth. Sometimes we're way over sometimes we're way under with what they're expecting. Sure. But nonetheless, that step one, we do that before there's ever an engagement because it's a lot of time to get these sold and anyone who knows how the, the MNA space works. We, we don't make any significant money until the business is sold. We're not in the business of just listing and having it sit. So step one is getting on the same page evaluation.
John Jantsch (05:00): So how, because there are no tangible assets, obviously it's a lot easier to sell a building, you know, as part of a thing. Right. So because there are quite often are like three laptops and, you know, four cell phones as, you know, the tangible assets. I mean, how do you end up putting some, something that is intangible that is more than like, you know, a, a multiplier of revenue, because there are some people that have created a methodology that have created a framework that have created something exactly a way to actually get, you know, leads. Exactly. I mean, so how do you put a tangible value on those things that maybe actually haven't realized their opportunity?
Amanda Dixon (05:36): Exactly. Yeah. So if the business is returning net income, profit, EBIDA at the end of the year, it is absolutely worth something right to the right buyer, right? So just like with any other business, uh, in the agency space, the more profitable you are, the higher your valuation outside of the financials, there are some components that are unique to the agency space that go into, uh, what affects the valuation. Multiple, those multiples can range between typically two to 10 X, two to two times, or up to 10 times of your bottom line number. Some of those other factors could include the type of revenue that you have or you project based, or your clients paying you on a re current retainer, the size of your clients. Are they all SMBs small businesses or do you have enterprise really big clients? Yeah. What does your sales and marketing team look like? Do you have a leadership team? All those things go into, you know, setting what that, that valuation is outside of just the financials.
John Jantsch (06:33): Okay. Let's say you're talking to somebody who has had like 300% growth three years in a row. So there's still only, I don't know, 5 million. Right. But somebody looks at that and says, you've cracked something, you know, you've like in 10 years you're gonna be a 50 million business. I mean, is that, is there a way to value future growth?
Amanda Dixon (06:52): Yeah. Great point. So in the agency space, one of the atypical features of going through an M and a transaction, and this ecosystem is we just typically use a trailing 12 P and L we are looking at three years of PNLs, but the reality is agencies can grow a hundred, 200, 300% year every year. It's not, you know, atypical. So we look at a trailing 12 number for retainer based agencies. If they've got a model down for getting new business, right. And their last month of MRR is higher than the average of, you know, what the previous years sure. We'll give credit for that buyers sometimes push back a little bit, but we will absolutely give credit for projections. It depends on the time of year two, if you're midway through the year and you're projecting out the current year, it it's an easier, you know, case to make to a buyer than if you're finishing up, you know, 20, 21. And you're saying, but 20, 22 is gonna end up double hard to do evaluation off of that.
John Jantsch (07:48): Is there a right time or a right size? And maybe it ha has to do with like, what are your objectives in life? You know, but you know, is there such a, like, do you get too big? Do you get like too clumsy? I mean, I, I wonder if you look at agencies and go, yeah, this is like the sweet spot.
Amanda Dixon (08:06): Yeah. So the easiest agencies to sell are between five and 15 million. Okay. And that's BEC and, and in total deal value. So that puts you at EBIDA right. O starting right at about a million. Once you hit a million in E you are significantly less risky to buyers. Now we sell lots of agencies that are smaller, but once you hit a million, anybody you're significantly less risky to buyers, you're now valuation is, you know, five to 6 million or higher, which then becomes real life changing money for folks. So once you have that million, but that's a, it's a great time to think about the conversation. We typically cap out somewhere in 7 million and it's 7 million in EBIDA just because there aren't that many agencies that are that size that haven't already gone through a transaction, the, the five to 15 range. There's just so many more buyers. When you get above 20, 25, 30 million, the buyer pool decreases and you lose the strategic buyer. Yeah. So strategic buyers or other agencies that are looking to bolt on a smaller yeah. Uh, those types of buyers, founders love because they understand the culture, they get the, you know, what it takes to be successful in the agency space. And they're not just making decisions based on financial returns. So, you know, I'd sell on that five to 15 range, but again, to each a zone. And
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John Jantsch (10:26): to that point you just made do people, um, are you seeing anybody selling parts that, you know, it's like, Hey, I, we I'll just throw out an idea. We, we need a team of, you know, YouTube, you know, averages experts or social advertising experts. And we don't have that. So we want to acquire a firm that just does that as kind of a part rather, you know, sort of an AC acquisition hire.
Amanda Dixon (10:49): Yeah, exactly. So we see buyers do that all the time, and that's what strategic buyers do. You could be a really great, like e-com web dev shop and say, okay, we need performance marketing to drive eCommerce leads to our clients. We develop these great products, but we're not able to drive traffic to them. And our clients are asking for that. So that's really what strategic buyers are doing in this ecosystem. Sellers are not typically ever selling just a part of their business though, are really selling the whole thing.
John Jantsch (11:20): So talk to me a little bit about how hard it is. If you know, a very common model today is people are outsourcing a lot of the implementation fulfillment. So does that make it actually harder to sell because you don't really own that part of it?
Amanda Dixon (11:33): Yes and no. So if your project based agency and cash is challenging to manage, and the way that you work through that is by outsourcing, keep doing it because bringing in house and then having cashflow issues are not being profitable because you're overstaffed for projects is worse than having outsourced labor. If you retainer based, no, bring those people in house. There's no reason to, you can scale up if you've got the, if you've got the retainers,
John Jantsch (12:01): Talk to me a little bit about the consultant versus agency model. I work with a lot of, of consultancies, or at least that's kind of how they refer to themselves, who I think are, are strategic. They're providing more strategy and not necessarily fulfillment is that, it, it, I, I do think a lot of times that is a harder model to sell because it is typically, you know, even if it's a $5 million firm, it's typically about the people that they're buying or the people's relationships or the people's knowledge is that hard to sell than fulfillment engines.
Amanda Dixon (12:36): You know, it's interesting the market shifts, right? Like every market does the agency M and a market shifts too. We've seen over the course of the last couple of years, large agencies realize they need a seat at the strategy table. Yes. To do the fulfillment. So large agencies and financial buyers are saying, okay, we need to bring on management consulting, whether it's just around sustainability or diversity equity inclusion, or whether it's around just branding, the strategy piece has become a very desirable because oftentimes strategy is backed by data. And, and so have yes. Having a seat of able when you're in the C-suite, which those folks typically are, it, it is valuable. I wouldn't say it's harder. Uh, just the buyers are a little bit
John Jantsch (13:22): Different. Yeah. Well, that makes a lot of sense though, because I mean, one of the things that's going on in the world of fulfillment is you probably know is it's sort of a race to the bottom financially. Yeah. You know, I can get a website or somebody will promise to develop a WordPress for me for 500 bucks. I mean, I who's to say exactly what it's gonna be exactly. But I think it's gotten tougher to sell hasn't
Amanda Dixon (13:40): It? Exactly. Well, and look at what happened in the influencer agency space. Yeah. Influencer agencies 5, 6, 7 years ago, were making a killing. They were brand new. Yeah. Uh, you could be just a standalone influencer agency. Now with the rise of the influencer tech feels like a little bit of a race to the bottom. And some of those agencies are really struggling to, you know, remain profitable.
John Jantsch (14:01): Well, that happened 10 years ago, social media, only agents. Exactly. You know, and then all, all of the general agencies figured out Twitter's not actually that hard. We could just do that for them. Can't we, do you have a success story or two that you, I'm not sure how much you can divulge in terms of names and dollars, but do you want to talk about something that you put together maybe that could give an, an people an idea of the value of really going to somebody who specializes?
Amanda Dixon (14:29): Absolutely. Well, uh, there's, there's no question that whether it's us or someone else, everyone going through this process needs to have an advisor on their side. There are a lot of idiosyncrasies that go into an M and a transaction. So the, the historical data, you know, and part of the trade organizations for M and a groups is that nine and 10 businesses that are listed, never sell. And our ratio of, of sale sales is exactly the opposite. We sell 90% of what we bring on, and that's mostly because we're, we're hyper nation this space and really understand the business and the buyers. But the other side of that is, you know, you just need an advocate to guide you throughout the process. So success stories for us are, you know, abundant, we get to help people change their lives every day. Right. So, you know, as we look at, at our business and, and really the purpose behind that, we really stick to that core value in that, you know, everyone that we're able to get across the finish line is forever grateful to us.
Amanda Dixon (15:25): It's like getting married, having a baby and, you know, selling your business. Most of the most people tr trying, just do that, that once. Um, so yeah, I mean, success stories for us live in, in the stories of our clients and the happiness that they feel and the, you know, the phone calls and the text messages and the, you know, the email and the press about a, a close transaction and someone's life changing. And the, you know, it, it's not just the phone. It could be the key employees that are minted as millionaires at those, the time of those transactions, or, you know, they go on to a much larger ecosystem and continue to do great things. Those, those are all, you know, wonderful times of this business. So
John Jantsch (16:06): We've talked really, or, or at least I think all we've really talked about is the idea of, you know, having a advisor, but does that advisor come also with the, the legal aspects and the financial advisors and the cuz, uh, you know, somebody let's say somebody has a successful transaction and they, they walk away with two and a half million dollars, you know, before their earn out or whatever. I mean, all of a sudden they've got, I hate to say their problems, but they've got different problems. Right. I mean, so are you really hiring a team with your organization or is it more like, oh, we tell people they need to get all those people.
Amanda Dixon (16:41): Yeah, exactly. Sorry. I was,
John Jantsch (16:43): Yeah. I, I tried to extend my question because I could tell you, you were struggling. Could you
Amanda Dixon (16:48): See me struggling? I'm muted for a minute. Sorry about that. Yeah. So we really try and do all of that in house. Folks still need to have their own counsel yeah. To go through the process. They need to, you know, the buyer produces closing documents, but at the end of the day, every seller needs to have a, you know, an attorney on their side who can help review those documents. It's part of a law firm. We have an amazing house council who helps with that process and, you know, will help guide the due diligence process. But ultimately the, the sellers do need to have, you know, an attorney. Yeah. Outside of that, I mean, we've just got an amazing team of people that come from the finance industry, but then folks that don't, um, people that come from the agency space, people that are entrepreneurs and, you know, our job is to handhold throughout this, what can be a very stressful, emotional process. And, you know, there's various components to that from financial to, to legal and, and some of it's just emotional therapy. All right.
John Jantsch (17:48): So one last question, cuz we're gonna run outta time. Have you ever experienced a transaction where a founder sold the company to their existing team?
Amanda Dixon (17:56): No, that's always that, that in some cases has been a scenario that people think they want to do, but then when they realize that there are other opportunities for their team, that could be better and could be yeah. They realize that that's probably not the best option for anyone.
John Jantsch (18:12): Yeah. It probably, it would probably be rare to have, uh, in many cases, a team that's even a, something they want.
Amanda Dixon (18:18): Right. Yes, exactly. So that, yeah, we find that, yeah. We find that a lot that, that folks that are, you know, senior leaders at the team don't want to, you know, own it, they're happy, you know, kind of in the real that they're filling and excited to go join a larger ecosystem.
John Jantsch (18:32): So short of looking for the purple, uh, dinosaur, could you tell people where we could find you Amanda and your work? Yeah,
Amanda Dixon (18:39): Yeah, exactly. Yes. LinkedIn is a great place to reach me, Amanda Dixon and our website. We are barney.com.
John Jantsch (18:46): Awesome. Well, Amanda, thanks so much for stopping by. This was a great conversation and uh, hopefully we'll run into you one of these days out there on the
Amanda Dixon (18:53): Road. Awesome. Thanks John. All
John Jantsch (18:56): Right. So that wraps up another episode. I wanna thank you so much for tuning in and you know, we love those reviews and comments. And just generally tell me what you think also did you know that you could offer the duct tape marketing system, our system to your client and build a complete marketing consulting coaching business, or maybe level up an agency with some additional services. That's right. Check out the duct tape marketing consultant network. You can find it at ducttapemarketing.com and just scroll down a little and find that offer our system to your clients' tab.
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