When selling your WordPress agency, you’ll need to demonstrate its value. Potential buyers will likely make their own valuations by looking at your company’s current revenue, performance, and potential for growth. So, how do you show them that it’s worth more than they think?
The best way to prove your company’s worth is to leverage key performance indicators (KPIs). It’s difficult to argue with empirical evidence as it provides objective insights into your business. The buyer can gain information about customer satisfaction, profitability, productivity, and more.
In this post, we’ll take a closer look at the importance of data for attracting buyers. Then, we’ll explore eight KPIs that can highlight your agency’s growth potential and value. Let’s get started!
Why is data important for attracting buyers?
The most important reason to present key performance indicators (KPIs) to prospective buyers is that data quantifies your agency’s success.
There’s no arguing with figures. They provide absolute proof of the effectiveness of your services and the financial outcomes.
On top of this, data can offer insight into your agency’s performance and help buyers identify key priorities.
By discovering trends or areas of concern, buyers can prepare to make proactive adjustments to existing strategies and processes. They can also make these decisions more confidently, rather than hazarding an educated guess.
Data enables interested parties to plan for the future. By understanding where problems lie, resources can be allocated to resolve these issues, or they can be directed to activities and initiatives that yield the best results.
Essentially, data presents an objective overview of the successes and challenges of your WordPress agency.
Key performance indicators that demonstrate growth potential
Now that you know more about the role data plays in a business sale, here are eight KPIs that convey growth and potential to buyers. This list certainly isn’t exhaustive, but it includes some of the most important metrics to leverage.
1. Client acquisition rates
As the name suggests, this KPI measures the cost of acquiring new clients for your agency. This enables buyers to better offset the costs against the rewards they yield.
Let’s say you spend $100 on marketing that results in the acquisition of 10 new clients. In this case, the customer acquisition cost (CAC) is $10. But if you spend $200 on marketing to acquire the same number of clients, your CAC is $20, which is much higher.
These costs should be weighed against the value that clients bring to your agency. So, you’ll need to review a variety of factors such as:
- Marketing and sales expenses
- Paid advertising
- Customer lifetime value (CLV)
- Cross-selling and upselling
- Renewal rates
- Churn rates
Ideally, you want the CAC to be substantially lower than the CLV. Most businesses aim for a 3:1 ratio, so the CAC should equal roughly one-third of the CLV.
Buyers may deem it too difficult to expand your customer base or achieve growth objectives based on acquisition costs. In this case, it’s unlikely that they’ll consider your agency worth the investment.
2. Customer lifetime value
Customer lifetime value (CLV) refers to the total value a client brings to your agency throughout the relationship.
It enables buyers to see how they can maximize profitability in the long run. Plus, with this metric at hand, they’ll be in a better position to make informed decisions about resource allocation, pricing, customer satisfaction, and more.
Here are some of the variables you’ll need to factor into calculating CLV:
- Repeat purchase rate
- Client acquisition costs
- Average order value
- Operational expenses
- Average customer lifespan
Determining a good CLV depends on your specific agency and industry. But generally, the higher the figure, the more desirable your business will be as it shows that clients are generating more revenue for the company over time.
3. Client retention and churn
Client retention is the number of people who continue to conduct business with you after making an initial purchase. This is key when appealing to buyers since the cost of retaining customers is usually lower than the cost of acquiring new ones.
This metric enables buyers to gauge brand loyalty, which can speak to additional factors like your agency’s reputation. It also helps them foresee long-term success and informs your competitive standing in the market.
These variables lower the risk associated with purchasing your business. So if you haven’t already done so, we recommend taking active measures to improve customer retention. You can do this by offering loyalty rewards (like free service upgrades) or improving your customer service.
On the flip side of retention is churn. This refers to the percentage of clients who decide not to renew their contracts.
High churn rates can be a strong indicator of an unsustainable business. It can also be a sign of larger issues within your company such as poor customer service, low quality work, etc.
4. Project timelines
Project timelines enable buyers to see the quality, scope, and cost of projects.
It functions like a roadmap that guides prospects in estimating resource allocation, streamlined planning, progress monitoring, and more. Essentially, it enables them to measure the overall productivity of your agency.
Many buyers will want a clear overview of important milestones, dependencies, delivery dates, and priority tasks. This allows them to see how efficient your processes are, and identify any bottlenecks.
So you’ll want to generate a reasonable time estimate for each of your services. You can also set certain dates/milestones that mark the start and end of projects.
5. Profit margins
Your agency might generate different types of revenue. But what’s attractive to buyers is your net profit margin.
This tells them how much revenue is left after your expenses are paid. You can calculate your net profit margin by dividing your net income (total revenue minus expenses) by the total revenue. Then, you’ll multiply this figure by 100 to get a percentage.
Naturally, the higher your profit margin, the more profitable your company is. Let’s say you have a profit margin of 10 percent. This means you earn $10 in profit for every $100 in sales.
A low profit margin signals to buyers that work is needed to increase revenue and reduce expenses, which drives up the risk of purchasing your agency. That said, there are ways to do this, such as selling higher-margin services, increasing prices, or reducing overhead costs.
6. Percentage of recurring revenue
Recurring revenue contributes to the value of your WordPress agency since it provides a greater level of predictability.
It’s much easier for prospects to plan for the future when dealing with revenue that’s expected on a regular basis, like every 30 days. It can also speak to other variables like customer satisfaction and brand loyalty.
Therefore, buyers may want to know how much of your overall profits come from recurring revenue. This can be broken down into different segments:
- New business recurring revenue refers to recurring revenue gained from new clients.
- Expansion recurring revenue describes new revenue that comes from existing clients. Common examples include add-ons, upsells, and cross-sells.
- Contraction recurring revenue reveals lost revenue from existing clients. It’s often used in SaaS businesses, and deals with lost seats and dropped features.
- Churn recurring revenue (which we’ve already discussed) refers to lost revenue from existing clients leaving your agency.
If you mainly deal with one-time payments and you have ample time to prepare for the sale of your business, it makes sense to increase recurring revenue.
Typically, this involves focusing on more long-term needs. Therefore, you might offer retainer agreements or monthly maintenance packages.
7. Website traffic
There are many factors that contribute to website performance, including speed, website design, and navigation. But an easy way to gain insight into web performance is to monitor traffic.
A high-traffic website indicates to buyers that your content is popular. But more than that, it’s typically linked to a high conversion rate and a positive return on investment (ROI), and it can be a good measure of brand awareness.
On the other hand, low traffic volumes can be a sign of problems on your site. There are tons of ways to increase organic traffic, so this might not be a deal-breaker for buyers.
However, it could work against you if a buyer is deciding between multiple investments. Essentially, if you struggle to attract visitors, your SEO and marketing efforts aren’t paying off.
What’s more concerning is if you capture traffic but fail to keep visitors engaged. This might be a sign of a poor user experience (UX), which can eventually increase your churn rate, and even direct traffic to your competitors.
8. Conversion rate
When we talk about conversion rates, we’re referring to the number of leads that become paying clients. Naturally, this is relevant to buyers since it massively impacts profitability.
Let’s say you have a beautiful website that captures lots of traffic, but you fail to drive action. This indicates a major issue with your agency. Perhaps your prices are too high or your call to action isn’t compelling enough.
This data is a bit like your website traffic, in the way that it gives buyers a good understanding of performance and profitability. But there are ways to increase conversions, so it probably wouldn’t deter an interested party.
That said, it gives the buyer information about your marketing efforts, website design, website performance, and more. A good conversion rate depends entirely on your business and industry, but typically, you want to hit 2-5 percent.
How to find a buyer for your WordPress agency
Once you’ve collected all the data you need for your WordPress agency’s sale, you’re ready to look for buyers.
This article has detailed the process of making your business more appealing to a buyer. But one of the biggest mistakes you can make is failing to target the right buyer.
Sure, you can find buyers on marketplaces, online auctions, and social media. However, it can be better to sell your WordPress agency to an established company like Freshy:
This increases the likelihood of securing a quick sale, thanks to Freshy’s fast response times. Plus, Freshy is well-versed in mergers and acquisitions, with a demonstrable track record of successful purchases.
With Freshy, you’ll benefit from the hands-on support of a dedicated in-house team. This means that tailored care is provided for each one of your clients to ensure a smooth transition.
Better yet, you don’t need to be the most profitable agency. Freshy has an eye for potential, so you won’t be ruled out due to the size, client volume, niche, or specialism of your business.
If you’re interested, complete this short form and a member of the team will be in touch shortly.
Conclusion
There are many ways to persuade buyers to purchase your WordPress agency. However, data deals with absolute facts and figures that paint an objective picture of your business success. Therefore, it’s one of the best ways to demonstrate value.
To recap, here are eight KPIs that demonstrate growth potential:
- Client acquisition rates
- Customer lifetime value
- Client retention and churn
- Project timelines
- Profit margins
- Percentage of recurring revenue
- Website traffic
- Conversion rate
At Freshy, we have an experienced team of WordPress experts which makes us perfectly capable of meeting a variety of client needs. Fill out this form today to begin discussions!
Featured image credit: Pexels.
