Are Agencies Ripe For Rollups?

Marketing School - Digital Marketing and Online Marketing Tips

Eric Siu and Neil Patel

Business, Marketing, Careers

4.6 • 1.4K Ratings

🗓️ 26 November 2023

⏱️ 7 minutes

🔗️ Recording | iTunes | RSS

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Summary

In episode #2618, We delve into the question of whether agencies are ready for roll-ups, the process of acquiring and merging multiple companies in the same industry. We highlight the potential advantages for agencies, emphasizing the benefits of combining customer bases, reducing expenses, and cross-selling services. This strategic approach can result in heightened revenue, decreased churn, and elevated valuations. Despite these potential gains, we caution that agencies experiencing declining profits and harboring unrealistic expectations may encounter challenges in finding suitable buyers. Our prediction is that the market for agency roll-ups will become more favorable, particularly in early 2024. Don’t forget to help us grow by subscribing and liking on YouTube! Check out more of Eric’s content (Leveling UP YT) and Neil’s videos (Neil Patel YT) TIME-STAMPED SHOW NOTES: (00:00) Today’s topic: Are Agencies Ripe For Rollups? (00:35) Small agencies can get 3-4x EBITDA, and large agencies can get 10x+ (01:44) Combining smaller agencies can generate more revenue and savings (03:20) Cross-selling services between agencies can increase profitability (04:34) Many agencies are looking to sell due to a lack of leads and high churn (05:45) Agencies' valuations and expectations are declining (06:54) Unrealistic expectations are hindering agency roll-ups (07:00) The timing for agency acquisitions is getting closer (07:20) That’s it for today! Don’t forget to rate, review, and subscribe! Go to https://www.marketingschool.io to learn more! Leave Some Feedback: What should we talk about next? Please let us know in the comments below Did you enjoy this episode? If so, please leave a short review. Connect with Us: Single Grain << Eric’s ad agency NP Digital << Neil’s ad agency X @neilpatel X @ericosiu Learn more about your ad choices. Visit megaphone.fm/adchoices See omnystudio.com/listener for privacy information.

Transcript

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0:00.0	All right, so we're going to talk about if agencies are ripe for roll-ups.
0:04.0	But first, before we define, or if we start, Neil, define what roll-ups are.
0:08.0	Roll-ups is when you take a lot of companies in the same space and you take them you buy them you combine them you merge it into one entity.
0:17.0	Yep. So we actually started this the way we started this title was talking about if creator companies are right for roll-ups. That's a whole other subject, but also in the economy that we're in right now,
0:26.3	we should also talk about if agencies are right for roll-ups because a lot of you listeners are actually agency owners.
0:31.3	So Neil, since you adjusted a title, you can start first.
0:35.6	Yeah, so typically if you're a small agency like really, really tiny, you know, you may get three, four,
0:42.2	five X, Ea for your agency if you if you're a
0:46.7	really large agency sometimes you can get 10 plus times multiple so what a lot of
0:52.3	people are doing is they're taking four or five six seven
0:56.0	smaller agencies combining them, cross selling the customer base, so that way
1:00.5	you're creating more synergistic revenue and then also cutting back on
1:05.7	expenses you don't need you know five HR people for some of these companies or
1:10.4	you don't need three CFOs, right?
1:13.4	So you're also creating some savings there.
1:16.4	You're cross selling.
1:17.2	So for example, if Eric has an SEO agency
1:20.1	and I have a pay-per-click agency,
1:21.8	I would sell all my customers
1:23.2	SEO services from Errik's and then he would sell all his
1:26.7	customers pay-or-click services right from my agency I'm making this up here and
1:31.4	you would start generating more revenue from your customers
	...

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