Lessons I Learned from Selling My Web Design Agency

Jun 10 2013 by Dan Norris | 17 Comments

Lessons I Learned from Selling My Web Design Agency

I sold my small web design business so that I could focus on my startup, Informly.

If you’re providing web design services as a solo freelancer, or are the founder of a web design agency with several employees, selling your business might be the farthest thing from your mind right now.

Perhaps you have never thought about it simply because you might not have realized that selling your business was even a possibility.

Maybe you are too attached to your company to even consider selling it to someone else.

Or the case may be that you have some fears about the things selling a business might entail.

You might want to get out of the web design business entirely, but are worried of the loss of income that might follow if you leave the industry behind.

Those are some of the things that might be holding you back from letting go.

However, it’s always good to think about your options.

Let me tell you the lessons I have acquired from selling my web design business, in case you are considering of doing the same thing. It’s not my first and only experience either, I’ve had other experiences in the area of buying and selling web design businesses prior to the sale of my own.

Lesson 1: You Don’t Have to Be Big or Well-Known to Sell Your Business

One of the biggest misconceptions I see people possessing, whenever the topic of selling a company to another is brought up, is that the company being sold has to be big and famous.

In my mind, that misconception comes from the fact that business brokers and tech journalists tend to talk more about the acquisition of a large, popular company by another larger, more popular company; so many of us end up thinking that acquisitions of small- and medium-sized businesses don’t happen.

In reality, there are loads of smaller acquisitions going on all the time. Like my web design business for example. It’s just that these business transactions usually don’t happen with as high a profile as, say, Yahoo! buying Tumblr.

These sorts of little transactions go on all the time because there are a lot of people who start a web design business and can’t make it work.

There are also many web design agencies looking for more clients, assets, and employees — and so one of the ways they can expand is through the purchase of a smaller web design company.

My web design agency wasn’t big. Not Tumblr big, anyways. Yet, I was still able to sell it.

Lesson 2: You Don’t Have to be Profitable

Many people think that you need to work your way up to being a profitable company in order for it to be appealing to a buyer.

That was not the case with my web design business.

In my experience, when larger web design companies buy smaller ones, more often than not, they are looking for something more than just profitability.

Web design companies and entrepreneurs are looking for signs of opportunities that the company they are looking to buy will grow if they take it over.

Lesson 3: Opportunity and Potential Are Important to Buyers

If you have terrible business processes, expensive employees, undercharged clients, a lot of overhead, etc. your profits won’t be great.

But another entrepreneur might look at that scenario and see opportunities. Opportunities to reduce waste. Opportunities to improve business processes. Opportunities for optimization.

Entrepreneurs, by nature, are people who see opportunities in things that other people are not able to.

It’s like flipping houses in the real estate business. For example, I see that in the area where I live in, houses are bought at a very low price, renovated by the new owner, and then sold at a much higher rate.

Everyone wants to buy a company with potential.

Lesson 4: Upward Trends Are Important

Prospective buyers want to see metrics going up.

When I sold my web design agency, my site traffic had doubled in its last 6 months.

Recurring revenue was going up. The number of clients was going up.

Even if you aren’t profitable, as long as important metrics exhibit upward trends, buyers will see opportunity and potential.

If your profits are good, but your trend is flat or going down, that is a big problem.

Lesson 5: Your List of Clients Will Help You Sell the Business

The biggest problem for web design companies is finding good clients.

If you have a list of good clients regardless of whether your business is profitable or not, this is going to be appealing to a web design agency buyer.

Even better than having a good set of clients is having clients that have recurring arrangements with your business. These recurring arrangements might include monthly website maintenance fees or web design service retainer agreements.

I had my existing clients on support agreements.

I also sent them an email each month with stats about their websites (which, by the way, was the inspiration behind Informly, my startup).

I was hosting most of my clients’ websites.

In the end, the main reason I was able to sell my web design business was that I had good clients who brought in recurring revenue into my business each month.

Lesson 6: Some of Your Assets Aren’t as Obvious as They Seem

What do you have within your business that could be appealing to a buyer? These assets might not be readily apparent.

In my case, one of my assets was actually my company’s web design blog. The blog ranked #1 in Australia for the search term "website design" and #3 for the term "web design". The blog was bringing in 1 lead a day to my business, on average.

My web design blog had a lot of value to someone who wanted web design leads.

Why?

They would have had to pay Google thousands of dollars a year through the AdSense platform to get the same amount of traffic for those keywords, so there was clear value in buying something that’s going to provide them ongoing benefits for free.

You might have something completely unrelated to your web design business that would be an asset to someone else. Look for those not-so-obvious assets and use them to help you sell your web design agency.

Lesson 7: Being a Small, Personal Business Isn’t a Deal-breaker

I used to give a lot of advice to small business owners. One of the things I would always say was "be as personal as you can in your business."

That means using your personal name, having pictures of yourself on your website, having transactional emails coming from your own personal email address instead of a robot like no-reply@webappexample.com, and so forth.

The advice about being as personal as you can is very different from what I see a lot of small businesses actually do.

What I see more of is that small businesses try to be more distant from their customers and more "corporate"-looking, to appear bigger than what they really are.

Often when I’d tell people their websites should be personalized, I would be met with criticism. A lot of people think that in order for something to be valuable, it needs to be some sort of impersonal machine, because being impersonal implies that the company is too big and too busy to have its founders and employees directly interacting with their customers.

I couldn’t have possibly been more personalized in my business.

I had a blog where all posts were by me.

I had loads of face-to-camera videos.

My face was all over the site of my web design company, including right at the start of the homepage in a big welcome message.

All of my clients dealt with me personally as the first port of call for almost everything.

When it came to selling my web design company, being small and being personal didn’t get in the way.

In other words, other companies who want to buy up web design businesses aren’t looking for some huge corporation — they’re completely happy acquiring small, personal companies like mine.

Conclusion

Whether you’re planning to sell your business or not, it’s good to at least consider these things for when you might have to do so, and also just to keep in mind that what you’re building might be worth more than you think it does to someone else.

If you have questions about the topic of selling a web design agency, please feel free to start a discussion in the comments below.

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About the Author

Dan Norris is the founder of Informly, a startup that enables web design companies to send their clients beautiful branded reports. He’s on Twitter, Google+ and Facebook (a little bit too often, according to Rescue Time).

17 Comments

Rudd

June 10th, 2013

Thanks for sharing your story. This really change and open my mind. I always think that people only get interested with big companies with profit being the only metric/indicator.

Chris

June 10th, 2013

Great article Dan! I was wondering what were some sites where business owners can post that their business is for sale?

Dan Banson

June 10th, 2013

My biggest question is where / how to start marketing your business as being for sale? How do you find larger companies that are looking to buy? I have a growing company that I have built from the ground up with quality, long term clients… and I am not happy. I want to do something more creative and get back to my passion of design and development but not sure where to start.

Demo

June 10th, 2013

Very interesting – never thought about selling.

Brent

June 10th, 2013

Hi Dan,

Great article, thank you. I was wondering if you typically approached potential buyers in the past and during your last sale? Or did the buyers find/approach you?

Dan Norris

June 10th, 2013

Hey guys thanks for the comments.

@Chris I put it up on Flippa. As for listing the actual business because my target market was Australia it was only really Australian sites that were relevant and they are all pretty bad. I’m not really sure if you get much success posting companies up there without a broker. It’s a pretty old school model much like real estate.

@Dan I think cold approaches work if you are looking at a small sale. If you are looking at a larger exit it’s a different story and I don’t have a lot of experience with that but if you are just looking to sell your clients and scale back it shouldn’t be hard to find a number of companies who are looking for clients. They are regularly paying $500 + to secure a customer through Adwords that they know nothing about to buying an existing client base is a no brainer.

@Brent I cold emailed a bunch of companies and listed it on Flippa. It was a reasonably well known site so that probably helped. It ranked well in Google I’d say a lot of the people I contacted had seen the site before.

subbareddy

June 11th, 2013

Thanks for giving this wonderful information

Jack Dent

June 12th, 2013

I think client database enough to show the agency straight.

James Curran

June 12th, 2013

Lots of great insight here thanks for sharing this. It seems more and more designers and developers are looking to move away from client design work and concentrating on their own projects. Informly is a brilliant concept and It’s great to see it has been so successful.

Stephen Moyers

June 13th, 2013

Thanks for the nice post. Your all points of selling services are well researched, up to the mark and helpful for any entrepreneur for selling services. Cheers!

Jord

June 13th, 2013

Recently started out, we have a few staff, some good clients on agreements. This article has made me think more strategically about how to add value in light of any of potential sale some time in the future.

Daniel Rabattkod

June 15th, 2013

It’s easy to get too emotionally attached to your business when you infact probarly would be better off selling it.

Brandon McBride

June 19th, 2013

Unfortunately, Daniel is right. Sometimes you may not be the right person to run it.

Ahmad Raza

June 22nd, 2013

Its nice that you have shared your story with us..

jose

June 24th, 2013

great article but wanted to read more specifics life a what was the price range?, how many clients did you include?, did you have any web developers or designers working for you?, were you solo?. Did you create a business banking account?, an llc?, how do you get to sell it?. Is it by contacts?, does an offer randomly appear on your email?, any other details will help thank you

Alex Adams

June 24th, 2013

To a fellow web design/development business owner this is a really encouraging and reassuring article Dan. Thanks for sharing the benefit of your experience.

Working in the digital domain lowers the barrier to setting up in business, which I believe results in a lot of un-planned seat of the pants operations being formed. Against this backdrop it’s easy to see that a lot of people may become dissatisfied or overwhelmed by the managerial and administration aspects of running a business and want to get back to their roots.

I think if you enter into business with an exit strategy in mind (or develop one very early on) and you concentrate on building that business into a valuable asset with the sole intention of selling at an agreed point in time then you’re less likely to feel bogged down. The flip side of this is that it will more often help you to build a better business because if you’re focussed on making it an attractive asset for purchase then you’re more likely to build in some decent structure and processes that will in turn help you to deliver a better all round value adding service to your clients. And that may very well result in a better price when you do come to sell.

So for my money an exit strategy is a winning strategy all round and as I said it’s really encouraging to hear from someone in the same business domain who’s actually lived it.

Thanks,
Alex

Tony Chester

July 17th, 2013

What a timely article for me. I just posted on our blog this week that we are selling my web firm – OnWired. http://onwired.com/blog/onwired-is-looking-for-a-new-owner/

A lot of what you’re saying really hits the nail and gives me a breath of fresh air!

Thanks Jacob for sharing this post and congrats to you Dan!

Tony Chester — soon to be ex Principal of OnWired

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