One of the most convenient options for selling your WordPress agency is to target competitors. But while industry experience can lead to a quick sale and a higher price, you might not fully understand the risks involved.
To decide whether this is the right move for your business, you’ll need to weigh the pros and cons. Does a smoother transition make up for restrictive non-compete agreements and loss of control? Plus, there are other factors to consider, like how you’ll protect your assets and communicate the news with your team.
In this post, we’ll discuss the process of selling to a competitor and explore the pros and cons. Then, we’ll share six key considerations to ensure that the sale goes according to plan. Let’s get to it!
What does selling to competitors involve?
When you sell your WordPress agency to a competitor, you are handing over control and ownership to another business in your industry.
There are various reasons why your company might attract strategic buyers. Perhaps they want to increase their market share or gain access to new technologies. But what does the process actually entail?
For starters, not all competitors are the same. Here are the main types you’ll be dealing with:
- Direct competitors usually offer the exact same services as your agency for a similar price.
- Indirect competitors provide some services like your own.
- Near competitors (also known as potential competitors) could pose a threat to your business success. However, these competitors currently operate in a different region (or target a slightly different market).
When it comes to selling to competitors, there are two different types of business sales:
- Mergers blend two companies together to form a new joint enterprise. This process involves thorough due diligence and negotiations can be tricky. The success post-sale largely depends on the ability of the buyer and seller to align their goals and integrate corporate cultures seamlessly.
- Acquisitions occur when one agency completely takes over another. Typically, the seller will give up all stakes they have in the business to carry out a clean break. This means that the company could even be dissolved post-sale and the seller wouldn’t be able to stop it.
You’ll have to choose which option works best for you, based on how much/little you’d like to be involved in the business afterward.
The pros of selling your agency to a competitor
Now that you know a bit more about the process, let’s take a look at the advantages of selling your WordPress agency to a competitor.
1. Better financial terms
One of the biggest benefits of targeting competitors is that it can often result in a higher sale price.
This is especially true if the buyer sees your company as an active threat to the success of their own business. In this scenario, your agency holds more value, as opposed to selling to other types of buyers like investors.
Regardless of that situation, competitors have existing knowledge of the industry and an awareness of other/potential competitors. Therefore, they’re often willing to make higher offers to secure a strategic advantage.
You may even be able to negotiate better deal terms such as flexible payment options or other perks. Competitors are more likely to agree to your conditions because the acquisition is highly desired.
2. Quicker sale
Another reason to consider selling to a competitor is that it may lead to a speedier sale.
For starters, the due diligence process can be trimmed down since buyers are already familiar with the industry and market dynamics. Their inherent knowledge can also expedite the negotiation phase since it reduces the need for extensive discussions.
On top of this, you won’t have to market your agency for sale. This process usually demands a significant time investment to craft persuasive materials and engage with prospects across various platforms.
Competitors also have experience building and maintaining a business. Therefore, they might already have established relationships with banks, insurance companies, and other firms. This eliminates another variable that often holds up the process.
When it comes to post-sale issues, some buyers (particularly those who lack industry experience) may insist that you stay on for a period of time to train the new owner. Meanwhile, selling to a competitor might mean that your assistance isn’t required. Or, at the very least, the process won’t take as long.
3. Smoother transition
Compared to an inexperienced buyer, a competitor is likely to have extensive experience in the WordPress agency space. This can result in a smoother transition.
For starters, if the buyer is merging their business with your own, they’ll likely have established operations in place. This means they can run the blended company with minimal adjustment to their day-to-day procedures.
It can also lead to a more efficient integration for your clients and employees. Meanwhile, handing your agency over to a buyer who’s well-versed in the nuances of your industry can help preserve your reputation and legacy.
Your business might even benefit from the fresh perspective of another agency owner. And if you stay on good terms, there could be further opportunities for collaboration or joint ventures further down the line.
The cons of selling your agency to a competitor
Now that you know the pros of selling to a competitor, let’s explore the drawbacks of this move.
1. Unhonorable intentions
One of the main problems when selling to a competitor is that it can put sensitive business information at risk. This is especially concerning because some buyers may not actually be interested in acquiring your company.
Instead, they may view the deal as an opportunity to gain access to sensitive data or trade secrets, with no intention of completing the sale. Naturally, this can harm your business in the long run while enabling competitors to scale their own operations.
2. Restrictive non-competes
Selling your WordPress agency to a buyer in the same industry might require you to sign a non-compete agreement.
Typically, this will restrict your ability to join or create a similar business within the same geographic territory, or within a specified period of time. This can hinder your post-sale opportunities and stop you from finding further success in the industry where your skills and experience lie.
3. Industry consolidation
It’s important to be aware that selling your agency to competitors can contribute to industry consolidation. This is only really relevant if you (or the competitor) hold a substantial market share.
Essentially, with reduced competition, the remaining businesses (including the competitor) can gain too much control over the market dynamics and pricing. Therefore, it can have a huge impact on your clients who might face limited choices and steep fees.
4. Loss of control
Some sellers struggle to come to terms with the loss of control once they hand the reigns over to a new owner. Even if you’re involved in a business merger, you won’t be the only one who gets a say in the agency’s operations, policies, and development.
Redundancies and layoffs may occur, which might mean saying goodbye to long-standing employees. And you might even suffer an emotional toll as you adjust to your new role or step away completely. This is especially true if you’ve invested years of your life into building your agency from scratch.
5. Mismatched visions of the future
Another problem when merging WordPress agencies is that conflicts can arise that disrupt the integration of the two businesses.
If your vision for the future doesn’t align with the buyers, it can lead to inconsistencies or shifts in the brand’s identity. This can impact client loyalty, erode your business reputation, and even damage the legacy you’ve built.
And although some buyers will adopt a collaborative vision for acquisitions, there’s no way to tell that it won’t bring about cultural clashes. For example, having two (or more) leaders at the helm can expose differences in management styles and company values.
Six considerations when selling your WordPress agency to a competitor
Now that you know the pros and cons of selling your agency to a competitor, here are six key factors to consider.
1. Explore other buyers
Although it can be convenient to sell to a competitor, it’s important to explore all avenues to make sure that you get the best deal possible.
For example, you might prefer to list your WordPress agency for sale on marketplaces, especially if you have a niche specialism that makes your offer stand out. Alternatively, you could take your business to auction.
You could also sell the company yourself. However, this can be time-consuming since you’ll be responsible for all the marketing, inquiries, and negotiations.
If you find that selling to a competitor is your best bet, you’ll want to select an established WordPress agency like Freshy:
With over 15 years of experience, Freshy has a skilled team of over 40 WordPress professionals that cover ecommerce development, web design, WordPress security, WordPress maintenance, SEO, and more.
But what makes Freshy a great candidate for your agency is its strong track record of successful acquisitions and mergers. Our in-house support team will deliver personalized care and support to all of your clients. This helps you secure a smooth, speedy transition which benefits all parties.
Freshy is also interested in WordPress businesses of all sizes, client volumes, and specialisms. To begin talks today, simply fill out this quick form and a member of the leadership team will be in touch.
2. Protect your assets
If you’re considering selling your WordPress agency to a competitor, we recommend drawing up an airtight confidentiality agreement before moving ahead.
Typically, you’ll do this using an experienced intermediary (like a business broker) or a lawyer. The document will contain non-interference provisions to protect employees, clients, intellectual property (IP), etc.
Once you’re certain that the buyer’s intentions are sincere, only then would you divulge financial information, client lists, and employee names. At that point, the buyer is free to carry out their own due diligence, which you may also like to control/censor using non-disclosure agreements (NDAs).
3. Get a professional valuation
It’s always best to find out exactly how much your agency is worth by obtaining an accurate valuation. This can inform the purchase price and provide a good starting point for negotiations.
Most valuations will assess a range of factors including the agency’s financial health, client base, potential for growth, and more. The appraisal can also highlight areas where value can be added to drive up the sale price.
4. Qualify the buyer
Once you have a competitor who’s interested in acquiring your agency, it’s up to you to verify their intentions and experience. This can also help weed out buyers who are attempting to gain access to company secrets.
Here are some questions you could ask:
- Why are you interested in the agency?
- How does the merger/acquisition fit into your long-term business plans?
- Have you acquired competitor companies before?
- What financing do you plan to use?
- Will you allow my team to confirm your financial capabilities?
- In the case of a merger, will you provide details about your existing business operations?
Qualifying buyers can help you avoid some of the biggest mistakes when selling a company. Note that first-time buyers can indicate a greater risk and may require extra due diligence on your part.
5. Be transparent with your team
When the deal closes, it’s important to communicate the news with your employees before making public announcements.
Naturally, there will be a time when you’ll need to prepare clients for the transition. But the well-being of your team should be your priority as business acquisitions and mergers can cause lots of anxiety and uncertainty.
For starters, you don’t want to leave it too late to share the news with them, or they might learn about the sale from other sources first. But if you make the announcement too early, you might not have enough details to ease their concerns.
We recommend sharing the news with a handful of key staff members first, like your management team. It’s also best to do this at the start of the week, so they’ll have time to ask questions. Meanwhile, you ought to be clear and transparent about your reasons for selling, and how it will impact their day-to-day lives.
6. Integrate post-sale
The easiest way to facilitate a smooth transition is to create a detailed roadmap of milestones for transferring ownership and responsibilities.
As we discussed in the previous section, it’s important to continue practicing open communication with your employees and clients about the changes to come. You should also involve key stakeholders to minimize disruption.
After that, there are things you can do to ensure a collaborative and respectful integration. For business acquisitions, you may need to determine how long you’ll remain involved and whether any training needs to be provided.
If you’re merging two companies, you’ll need to align operations, company cultures, and visions for the future. You should also touch base with the buyer’s leadership team to develop strategies for leveraging one another’s strengths.
Finally, it can be useful to implement methods for progress monitoring to reveal potential issues.
Conclusion
If you don’t want to search for buyers yourself or deal with crowded marketplace platforms, you might like the idea of selling your agency to a competitor. With relevant industry experience, this can lead to a higher sale price, a quicker sale, and a smoother integration.
However, you might also have to deal with insincere offers, non-compete agreements, and conflicting visions for the future. Here are six considerations to help you facilitate a smoother sale:
- Explore other buyers.
- Protect your assets.
- Get a professional valuation.
- Qualify the buyer.
- Be transparent with your team.
- Integrate post-sale.
Freshy is best known for its WordPress design and development services. But our company also has a long history of WordPress acquisitions and mergers, including partial acquisitions. You can fill out this form to begin talks today!
Featured image credit: Pexels.
