SEO Agency For Sale? A story of what happens as you grow

I haven’t written much recently about the inner workings of Distilled as a company, but it’s obviously something I spend a lot of time thinking about. I love reading others’ posts on similar subjects though, so, in tribute to one of my favourite blog posts of all time (and lots of openness since from our friends at SEOmoz) I thought that now would be a good time to write about some stuff that Duncan and I have been thinking about a lot this year. If you are going to comment, bear in mind that I am writing this just before I jet off on honeymoon for 3 weeks in New Zealand (whoa! 3 weeks? What happens to you when you are offline that long?). I’ll drop back in here to reply when I get back!

To dive straight into the main point of the post, we’ve had a number of people approach us this year who were interested in buying Distilled. To tell you our answer straight away would over-simplify the thought process...

The approaches have fallen into three categories:

  1. New integrated agency (with or without funding) looking to bring us in
  2. Larger player in our industry with technology (not SEOmoz!)
  3. Larger player in related industry wanting to build technology

Obviously it is always flattering to have people think that you are doing good things and looking to buy your company is an extreme example of this. So we loved that... But then we had to work out what we wanted to say in answer.

A framework for a decision

Before trying to work out the answer to a specific question (“can we buy you?”), we tried to work out a framework for making these decisions - essentially trying to work out what is important to us. It’s probably not an exhaustive list, but our initial brainstorm came up with a list something like the following:

  • Fun (for us and our team)
  • Control
  • Money (obviously!)
  • What happens to our brand

At some point in a negotiation, a lot of things come back to money, but early on, it’s surprising how few things do.

Control was probably the most important one (at least partly because it leads to us being able to make the decisions about the fun and the brand). Our connection to our brand is at least partly irrational. We have never done this before. We’ve never built and run a business and so it’s emotionally important to us in a way that I imagine second or third companies might not be. But there is also a very real way in which it’s important; if people are interested in the people and technologies enough right now to be interested in paying for them, but they aren’t interested in the brand, then we’re pretty confident we can improve our prospects by making the brand an indispensable part of the package.

So once we’d realised control was so important, we broke that out further:

  • Control over our personal day-to-day roles
  • Control over the direction of the business (clients, rates, services, staff etc.)
  • Control over the branding
  • Control over the owning entity (i.e. board seats etc.)

We started to think we had it nailed at this point - that if an offer crossed a threshold of keeping enough control, then we might consider it (below that point, it would effectively just be hiring the team). However, as we thought about it some more, we realised that actually, we might not really be for sale in any meaningful way right now.

If you ignore personal cashflow concerns, the basis of the decision comes down to whether you think you can do more in conjunction with another party than you can do on your own (scaled by the % ownership you have of the joint thing).

We started to think about the kinds of thing we can / could build / do with extra cash (obviously a larger parent company isn’t the only way to get access to cash - once you start thinking down this route, funding is also an option). It’s not the first time we’ve wondered “what could we do with an extra £100k, £500k.....?”.

The rapid development nature of what we do means that in pretty much all cases, we could, with a modest investment (of the order that we can just afford) get to a point where either the project would be self-sustaining or at least would be a much juicier investment prospect. That of course means putting our money where our mouth is (our mouths are?) and investing pretty heavily in growth. So that’s what we’re doing.

Now, the groups of people we met who were interested in our business were great people - we could actually see ourselves going through with some of the possibilities in many ways - but ultimately, we started this business ourselves to see where we could go, to challenge ourselves and to build something meaningful. One thing that is already a very visible outcome for me is that employing people is one of the most rewarding things there is. We are working at the moment on ways to give our guys a share of the pie and we owe it to them to make that pie as valuable as we can.

So what are we doing?

Well, I’ve been quite quiet writing here on our own blog - partly because I’ve been putting most of my good ideas into writing for the SEOmoz blog. The contacts (and contracts) we have got through that have been pretty special and there has been a lot of cool work being done quietly at Distilled HQ recently.

We are going to be shouting much more about Reputation Monitor, our buzz and brand monitoring tool. It has just had a facelift and some new features added (Duncan is going to be writing a post about the technical stuff and benefits, and there are loads more cool things on the way). A few high-profile individuals and some great brands are now using Distilled technology to keep track of what is said about them on the internet.

Working on a new version of Reputation Monitor has needed additional development resource and we are now at 14 staff. The team has grown and matured hugely since this time last year when I think there were 6 of us. I have certainly learnt a lot this year and I think everyone else has too. Much of the new resource is development resource - working not only on Reputation Monitor but also on our new equity-stake-venture (the first time we have worked for an equity stake - more details to come soon, no doubt) and also to work on some new, to be confirmed (sorry, I mean secret!) stuff.

One outcome of this is that we only just fit into our new (and, we thought at the time, huge) office. I think we’ve missed announcing at least some of our new hires here, but it almost goes without saying that we are very excited to be growing (and, as always, a healthy amount nervous).

What about the credit crunch?

One obvious question to ask is whether this is a good time to be doing all of this as the financial world crashes down around our ears?

Well, our last few months have been our best ever (each improving on the last since August) and with some definite cashflow tied up around the equity project and more cash in the bank than ever before, we are confident that this is a perfect time to be investing in ourselves and our colleagues and technology. We are intending to continue to grow. I hope our clients and partners will join us in bucking the wider trend.

As Seth Godin said as the credit crunch hit

If I wasn’t already running my own business, today is the day I’d start one.

Inexperience

Having said all of that, we have never run a business through a downturn before and we are well aware that hubris would be an incredibly easy mistake. So we are taking advice from all areas we can and looking into creating a trusted board of advisors to help steer us through.

I am incredibly proud of what the team has achieved and amazed that this little company started just over 3.5 years ago in Duncan’s front room is going so well. I’m also pleased that it’s doing well enough for me to leave it for 3 weeks. I don’t think I could have done that this time last year.

So on that note, merry Christmas, happy holidays and enjoy your New Year parties and I’ll be back in January (after one last technical post so it’s not all about the business - stay tuned for one of the most useful tips I have discovered recently for helping your SEO campaigns).

Will Critchlow

Will Critchlow

Will founded Distilled with Duncan in 2005. Since then, he has consulted with some of the world’s largest organisations and most famous websites, spoken at most major industry events and regularly appeared in local and national press. Will is part...   read more

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9 Comments

  1. Awesome post, Will. Congratulations on all the attention as an acquisition target -- it sounds like you have thought through all of your alternatives amazingly well. Have a fun time in En Zed!

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  2. Thanks for sharing your thought process (and Duncan's), Will. It seems like you guys really went into this with the right approach - too many people just see the big check and don't think about what they may have to give up.

    Although I think control is a bit of an illusion, there's nothing irrational about being a bit possessive over something you've built from scratch. Building a business is a lot of work and ultimately a very personal experience.

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  3. Nice post Will - BTW congratulations on the wedding.

    Its always nice to read someone elses perspective on this - having been in a similar position (in a smaller environment), and see that many of the concerns are shared no matter how big you are.

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  4. Long live distilled

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  5. Hey will,

    I won't re-iterate what you've said already but good choice, I don't think you'll regret it!

    Oh yeah, and merry bloody christmas.

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  6. Well done on the success so far, have been enjoying your blogs for sometime now.

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  7. Will,

    First congrats on the wedding. Second, thanks for sharing this. I own a small (3 person) SEO agency and we've had a couple of broad-level inquiries ourselves. Ultimately they have not been worthwhile as I'm happy to run this ship as long as I can, but I do think that even if you choose to decline an offer there is a tremendous amount to be learned. Not just about buying and selling businesses, but about setting your priorities, being efficient and effective and who knows what other good lessons.

    One idea is to sell a piece of the business. Not sure if that is practical given your structure, but I did that for a "side project" business I had a while back. We ultimately decided to sell one website that was our major asset, rather than selling the company itself. This provided a more tangible discussion, as while its hard to put a value on a website, its even harder to put a value on people. IMO that's the trouble with service businesses - almost all the value is the people and what they know, and so if they leave you lose value. As such, a potential buyer has to factor in that risk. There isn't much that is "tangible" that they can include in the value, unless you have significant client contracts, software or intellectual property.

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  8. Late to the party but an insightful post regarding the growth of business. As a business owner and a student of business I have found that the very crossroads you describe come to every growing concern. It is at once a time to cheer and reflect as you have so elegantly stated.

    I agree wholeheartedly with your conclusion. You have only scratched the surface of your capability and have aligned yourself with great council.

    I look forward to watching your company grow over the years to come.

    Besides what else could you do with yourself that has so much potential?

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  9. Thanks guys - I hadn't spotted a couple of these recent comments.

    Slygrrr - that's a great great comment. Thank you. Elegantly written and the last sentence should be inscribed on my desk.

    Hopefully see you again soon.

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