Are you considering a merger in the future? Have you thought about the logistics of managing the resulting agency? How would the structure of that newly merged agency look? There are many things to consider with a possible merger, like making sure it equally benefits both the team and the clients. Today's guest entered into M&A as the solution for the future vision of his agency. He was lucky to find a merger partner who turned out to be a great fit for his managing style, which is key to their success.

Kevin Hourigan is the president of Spinutech, a digital marketing agency that takes a data-driven approach to craft measurable results for clients. Originally, Kevin founded Bayshore Solutions, which offered web design services, interactive marketing, and e-commerce for clients in 55 countries since 1996.

More recently, Kevin and his new partner decided to merge their agencies becoming an end-to-end solution offering greater value to clients. He now chats about the decision to go ahead with the merger and how they structured the resulting company.

In this episode, we’ll discuss:

Surviving economic downturn and adapting to the market
How to structure and lead an agency after a merger.
Building culture and inspiring a large team.

Sponsors and Resources

Wix: Today’s episode is sponsored by the Wix Partner Program. Being a Wix Partner is ideal for freelancers and digital agencies that design and develop websites for their clients. Check out Wix.com/Partners to learn more and become a member of the community for free.

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Podcast Takeover!!

Get to know your Smart Agency Guest Host: Dr. Jeremy Weisz is the co-founder of Rise25, an agency that helps companies launch and run podcasts profitably. He followed Jason’s podcast and eventually joined the mastermind and has been a guest on the podcast before. Today, he’s helping Jason bring something new to the Smart Agency podcast audience by interviewing a special guest and bringing a new perspective to the show.

How to Adapt to the Changing Market Needs

Back in January 1996, only 1% of companies had a website. At the time, Kevin owned an outsource-IT company that helped small businesses manage their servers. He and his team also liked building websites and offered that service to clients. However, the most common response was “what’s a website?” Other clients would argue they didn’t need one. So at first Kevin’s company was marketing a product that companies didn't understand or value.

He recalls, about six months after they started offering website development some of those clients started calling them back. That’s how they started and slowly grew their model to building a 10-page $5,000 website. By 1998 the team had grown from 3 people to 30 team members and continued to grow to 250 team members by the year 2000.

Little did they realize, the burst of the dot-com bubble was just around the corner and they were once again left with a 20-person team. It was a stressful time, with many businesses around them disappearing. They managed to stay afloat by adapting to the market which resulted in keeping some core clients.

Lessons and Recovering from a Down-Turned Economy

Looking back, it’s easy to see the mistakes made during the dot com bubble. The growth was immense and came in too fast. Many businesses spent money they didn’t have on the best websites and the consequences were disastrous. After going through such a rapid decline, going from making 250K per project back to 15K per project, why continue?

Kevin was actually ready to quit at that point. He came close to going public with the company and already had a couple of angel investors. Although he felt it wasn't a viable plan, the investors wanted to move forward because they believed he could make it. And his agency did make it -- years later he was able to buy out those investors.

Three years after scaling back to a 20-person staff they had grown to 50 employees again. The agency figured out who they serve and the value they brought to those clients. Economic growth and recession is cyclical, but your agency can survive and even thrive in a tough economic climate

What is the Future for Agencies?

Kevin owes much of his success to his ability to adapt to the market. While his company started out as an IT services business, he realized web development was the future. Even though clients didn’t see it right away, they eventually came around and embraced the internet era.

Then in 1996, his company went full-on with web development services. That was their sole focus for a while until the digital marketing side of the agency emerged. Once again they adapted to the demands of the market.

What’s next for the future of agencies?

Kevin believes the future of agencies relies on staying two steps ahead. The way agencies stay in the game is always being ahead of emerging technologies and being digital experts to their clients. As long as agencies maintain a level of expertise to help their clients grow their businesses, that’s how they stay relevant and necessary.

Using a Merger to Achieve Your Vision and Goals

Kevin’s goal for his agency was to become an end-to-end solution for customers – handling copywriting, web design, social media, etc. However, his team at Bayshore Solutions did not check all those boxes. They needed more team members who were experts in their areas and had more complex capabilities. This is why the merger was an easy decision for him.

He looked at partnering with a company he knew well. It belonged to an old friend at a competing agency. They both realized working together would help offer a better career path for their team and increase their value to clients.

What You Should Consider Before Starting a Merger Process

If you’re thinking about going through with a merger, here are some of the things Kevin recommends you keep in mind:

What does this mean for the clients?
How does it benefit the team?
How does it benefit the newly merged agency?

All of these aspects are very related and therefore need to be equally served. If the merger only serves one or two of these entities, one will be disappointed which creates the risk of a merger burdened by friction and frustration. If you value all three and ensure both cultures gel well, the result is an overall better agency.

Other aspects include the financial component and how involved you see yourself being in this new agency. Do you see yourself having an active or inactive role? This is a huge factor to consider prior to starting any M&A process.

How to Structure the New Agency After a Merger

The role you assume in the agency following a merger depends on how involved you want to be. For Kevin, it has been an evolving journey. He and his partner are 50-50 partners and early on they decided how that would work.

Both partners weigh in on very important decisions. Kevin is the executive in charge of web design and development while his partner oversees the marketing area. Furthermore, his partner is very focused on culture so he handles that aspect. Meanwhile, Kevin is a numbers guy, so they really complement each other in terms of managing the business.

When it comes to their differences, they agree not to discuss diverging opinions in front of the team. Instead, they work it out privately and deliver one united message. This is what gets communicated to the team, so as to not confuse them.

This is not something they considered prior to the merger. They focused on how both agencies complemented each other and were lucky to find out later they also complemented each other's managerial styles.

Management and leadership styles are something to take into consideration if you’re thinking about a merger.

New Leadership Layers and Creating Accountability

From a team member perspective, the merger meant new layers of leadership that didn’t exist in the original agencies. The merger created many new management roles, many were filled by existing employees and a few by new agency hires.

For Kevin, the key to changes such as this is leveraging traction. Everyone at the newly formed agency knew who to turn to for help and who is in charge of what. The road to getting that sort of traction started with putting together an accountability chart. This has evolved as the agency has grown with new roles and management positions being created.

#1 Key to Agency Operational Success

Kevin and his team have an Entrepreneurial Operating Systems (EOS) integrator at the agency implementing “pure EOS”. What this means is the agency stays as close to the original system as possible.

Kevin says many businesses say they use EOS, yet they haven’t defined the integrator and visionary. What they are doing is a very light version of these principles where they pick and choose what they implement and, in the end, this holds them back.

Kevin and his partner run. their agency following an operating system that has been proven by many successful companies before them instead of one created by them. This entails many hard decisions but it's worth it. After all, this framework has been successfully implemented by over 80,000 companies. It may not be perfect, but Kevin attributes much of their success to closely following the EOS framework.

The Key to Building Agency Culture with a Remote Team

Today, with offices all over the country and more than 165 employees, the agency still chooses to work mostly remotely. Their offices are open for the staff to work on-site if they choose. There are often about 25-35 employees in the office every day.

However, to maintain culture they organize events designed to attract everyone to the office, such as an All Team Meeting. On those days, they serve lunch, and generally, many more people show up wanting to interact with their coworkers. They also have one person in the organization dedicated to serving the team and the culture. This ensures they have all sorts of virtual and in-person activities to build camaraderie and inspire the team.

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