Navigating an Agency Acquisition for Rapid Growth with Leah Messina | Ep# 710

Smart Agency Masterclass with Jason Swenk: Podcast for Digital Marketing Agencies

Have you considered the potential for growth through a strategic acquisition? How do you anticipate the agency owner's role evolving during an acquisition process? What steps can be taken to ensure a seamless integration once the deal is finalized? Our featured guest today has undergone a significant transformation, transitioning from white label to a more comprehensive service offering and shifting from project-based to retainer-based services. Now, she embarks on a new journey for her agency as she navigates a strategic acquisition. Tune in to hear about the evolution of her career and what she’s learned about setting the course for a smooth agency transition and post-acquisition planning.

Leah Messina is the founder and CEO of Sinuate Media, a full-service digital marketing agency that works as equal parts data analytics, creative genius, and strategic mastermind for its clients. Leah recounts her transition from the entertainment industry to establishing her own agency in New Mexico, highlighting key milestones such as the shift to a retainer model and the expansion of services through a strategic acquisition.

In this episode, we’ll discuss:

• The downside of the white label model.

• Shifting to a retainer model.

• Seeking to grow through a strategic acquisition.

• Post-acquisition planning and integration.

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From White Label to Reinvention: Adapting to Market Shifts

Leah always wanted to have her own business and, after working in digital publishing and working at a small digital agency, she fell in love with this evolving industry and felt drawn to the emerging technology.

Leah's agency opened for business in 2006 and initially operated as a white label agency, providing services to larger media agencies who would then resell them to clients. While this arrangement allowed her team to work on prestigious projects, it also relegated them to the background, handling the day-to-day marketing tasks and creative execution.

The economic downturn revealed the drawbacks of the white label model, with clients delaying payments and seeking to internalize services. This shift led to a substantial loss of business, as white label clients accounted for approximately 70% of their revenue at the time.

Determined to overcome this setback Leah thought about some of the requests they sometimes got from customers, and identified an opportunity to diversify their services.

The shift was not easy, as it meant redefining the agency's business model and finding new ways to generate revenue. By embracing it, she showcased her willingness to embrace change and steer the agency towards a more sustainable and diverse future.

Transitioning to a Retainer Pricing Model

As she reevaluated her service offering, Leah also started thinking about the direction of the business and making strategic changes to adapt to the evolving needs of clients and the industry, which included a shift from project-based work to retainers.

With projects, the focus was on delivering work efficiently and quickly, while retainers required building long-term relationships and serving as advisors to clients. This shift necessitated more integration with clients, being involved in early conversations, and offering solutions to operational issues that could impact marketing efforts.

During this transition, Leah’s agency was able to keep some key clients who were in the process of launching new businesses, which was a definite win. Apart from that, attracting new clients and retaining existing ones demanded additional sales efforts, such as public speaking and marketing training.

One of the primary challenges encountered in this shift to retainer-based work was persuading clients accustomed to giving orders to seek advice instead, which took positioning themselves as trusted advisors by showcasing their expertise. Additionally, Leah's team had to find a balance between providing valuable resources and not undermining the positions of marketing directors or CMOs.

Charting a New Course for Growth with a Strategic Acquisition

After two years of putting a heavy focus on the sales side of the business, Leah has been able to step away from the day-to-day operations and the role of project manager. Now she’s focusing on the business development side.

Looking ahead, her plans for the agency include integrating AI into their work and expanding through acquisition, specifically a web development company to enhance their services and capabilities further. In terms of fit, Leah focused on cultural fit, niche expertise, profitability, and the retention of key personnel as the main features to ensure a smooth transition. She also looked for an agency with a good process that didn’t require immediate huge changes. This way, they could just get to work and optimize it over time.

Right now, her mayor concern is how to integrate the teams and manage client expectations. In some cases, this requires keeping the acquisition a secret from clients for a period during the transition. By maintaining continuity and gradually introducing changes, businesses can mitigate potential concerns and ensure a positive experience for all parties involved.

Post-Acquisition Planning and Navigating Integration

During the acquisition process, Leah has learned the importance of good documentation and having a solid set of books and proper records when considering buying a company. Without accurate and comprehensive documentation, it becomes challenging to justify the acquisition and make informed decisions about the business's financial health and potential for growth.

Agency owners can run into a few gotchas once the past owners leave and the hard part starts with the integration so it’s important to ensure the sellers are coming from a place of transparency and accuracy in financial reporting.

Finally, being very conscious of the need for ongoing business development and strategic planning post-acquisition, Leah is now thinking about developing new retainer opportunities. This will involve taking a fresh look at the industry after the acquisition and finding new opportunities to establish a business that drives recurring revenue and complements its existing services.

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