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Everybody has a Jesse Gilmore agency transformation coach and founder of Niche and Control, author of the Agency Owners Guide to Freedom and the creator of leverage for growth. I’m the host of the leverage for growth podcast, and I know that in order for you to scale your agency successfully, there are multiple shifts that need to happen within your mindset, skill set, and leadership style.
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I am on a mission to interview marketing and PR agency owners on their journey to six, seven and eight figures and leverage the lessons from their journey to save you time, energy, and money to get your agency to the next level. If you find value in these episodes, watch the case study video to learn more about leverage for growth and how we successfully scale agencies at niche and control e-commerce assets that is niche in control.
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Decomp case study.
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US.
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Delighted to be on the show. Jesse. Thanks very much for inviting me.
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Yeah.
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Yeah, certainly. I mean, to go right back. I suppose when I
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Left school, I was always interested in business
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as a child, and I think it was my father that said, you know, if you want to learn about business, you should try to be an accountant. I don’t know if that holds these days, but, it gave you a good grounding in those days.
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So that’s what I did. I applied to a large group and qualified, retailers to be a, qualified as an accountant with them. Had a great career. I worked all over the world with them and finished up in corporate finance doing M&A transactions for this large corporation, multimillion pound transactions, and got a taste for it. I left them, because I was really interested in a business that valued people rather than they had a very much a shareholder value ethos.
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So I thought it would be great to, join a business that value people. So I joined Saatchi and Saatchi and, I’m most responsible for a,
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the finances of a turnaround management.
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Business in Hungary, based in Budapest, of all places. So that gave me my baptism of fire in advertising. And, I when I left there, I combined my, M&A experience with my advertising creative industries experience and joined a business called Results International.
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Which were an M&A firm specializing in our sector and stayed with them about 15 years. But over time, they started to move out of the sector. They followed the money into areas of healthcare and technology. So I decided about, 13 or 14 years ago to start my own business, found,
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M&A advisory. And we do what the name says on the tin.
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And, and that’s how it all started. Where where central London now we’re a team of about six people where sector specific. Mark Holmes but where size and geography agnostic. So we work for all sizes of agency all around the world.
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Yeah, indeed. Yeah. Us?
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yeah. So looking at the M&A landscape. So some people that are listening might understand mergers and acquisitions pretty well and other people might not.
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So in our previous conversation, we had talked about and how you had mentioned that agency mergers and acquisitions is not really like selling a house. There’s not really like a fixed price on it. So what are some of the key variables that influence how an agency is valued?
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Yes. I mean, that’s absolutely right. A business that, the. Unlike a car or a piece of real estate, that’s that’s almost got a book value. And you know that when you sell that piece, that that asset, you get that price, which corresponds pretty closely to the value in, an agency, the value it’s very much has, there’s an approximate value, but
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you have to get the right deal, because some of these deals are obviously spread over several years.
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You don’t often get the full cash payment. And I can go on to explain how you might do that. But most of these deals have some sort of incentive payments and all of that sort of thing. And these deals need to be structured really well to make sure you get the maximum value out of it. And also you need to make sure you have the best buyer possible.
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and we say there’s got to be three elements
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in choosing the right buyer. And one of those is is chemistry. When you first meet when you made a buy for the first time, you’ve got to instinctively feel that you could work with them. Because if your God is telling you otherwise, the chances are your gut is right.
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The second thing we say that’s got to be right with an agency deal is a cultural fit. There’s got to be a similar culture, a business culture, and we describe that as the way we do things around here. You know, you wouldn’t put a bureaucratic business with an entrepreneurial business. So that’s very important. And thirdly, you’ve got to have an outstanding business proposition.
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So there’s got to be a real commercial opportunity for those two businesses to get together. And all of those things together will drive you through all of those incentive payments and make sure you get paid. So you have the sort of the set up the right partner on the one side and, and the a well negotiated deal on, on the other side.
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So yeah.
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Gosh. As I say, I suppose there’s that, that first one where don’t treat the value as a standard value, that you can always get that for your agency because it very much depends on the partner, the buyer. And it very much depends on how well that deal is structured and negotiated. That’s so important. I think a lot of people probably don’t realize that they have to make the business as by a friendly as possible.
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And what I mean by that is the buyers, the business has got to be sustainable. A buyer’s worst fear when he goes to buy an agency is that held by the founder will leave and he’ll be left with something he can’t control it all. Just. It’ll just fall away on his hands. That’s his nightmare. So what you’ve got to try and do is make the business as sustainable as possible.
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And some of those things to make businesses sustainable. Good financial systems and procedures, a good new business pipeline so that
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you haven’t got any lumpy cash flows. There’s got to be a second tier management team, because the buyer will probably recognize that one day
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the founder will leave. So you’ve got to have a good second tier that will that will take the business over.
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So in that way, the founder has got to work on the business rather than in the business. And he’s gradually got to over time when preparing for sale, he’s got to start to extract himself to some degree from the business and and treat acts as more of an investor rather than an actual, participating, owner. So, that that really helps.
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Your.
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Yes, that’s absolutely right. I think that that sort of cliche of working on the business rather than in the businesses is, is a, an old one. I mean, it is possible to sell a deal, sell a, an agency where you’ve got quite a lot of reliance on the founder, but the founder’s going to have to stay with the deal for a few years.
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You know, I did a deal a year or so ago where the founder sold 60% of the business and kept and that, kept 40% for 3 or 4 years, which was then bought out. And they helped build that business within inside the, the new acquirer. And it grew really, really well because you’re
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taking advantage of the buyers infrastructure and client base to grow that business.
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So they’re quite good deals, and they probably got about 3 or 4 times as much for the 40% as they got for the original 60. So it’s not it’s not completely off the cards. But you know, if you if you’ve got a founder who’s looking to retire or move on, then you know, it’s not the best transaction. He wants to get out.
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You know when when we sell. So it’s best in that way to actually, try and, move out of the business, create a sustainable business.
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Wow. Quite, quite a lot. I mean, I suppose I’ve been doing it for 30 years, and and originally there would probably only be 3 or 4 buys you only had. My job was quite easy. You had to make 3 or 4 phone calls to some of the bigger holding companies, and they would, buy your business, and, and they weren’t too fussy into how on, on, on sort of on the types of business they were buying.
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As long as it fitted broadly a strategy, they, they would buy it. But I think there’s been a number of changes now that the market over those years, and particularly during the last ten, has got much more fragmented. There are a lot more specialist buyers out there, looking for certain specialisms with agencies. So some a digital consolidators.
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Some are PR consolidators or they’re all that much more specialist than they used to be in the agency world. So that that’s one thing. So when we work in M&A, we have to have we’ve got a very good research team here that was probably going to pull out, you know, several hundred possible buyers globally. For each business.
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So it’s a lot of work that we have to put into
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that as well as obviously constantly speaking with buyers who might be interested in these businesses. That that’s one area. Another area is,
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the private equity, private sector has got involved in agencies, particularly in the last ten years. So that
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an interesting area.
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I would say that often private equity backed roll ups, trade roll ups have been very, very successful where private equity
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has just invested in agencies. That’s not been I don’t think that’s always been successful. And so I don’t know whether we would recommend that approach, but where it’s part of a roll up and you get the traits, synergies, then that that can be quite successful.
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So that’s been another element. I think the other thing that’s being quite interesting is the development of deal structures. You know, 10 or 15 years ago, the Earnout, the standard Earnout, 2 or 3 year earnout was the way buyers bought agencies. But the problem with those earn outs for the buyer is that
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legal ownership doesn’t pass into that last payment is made.
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So that makes integration very, very difficult, very, very slow. And I as everybody knows, the world is speeded up. It’s constantly speeding up with the advent of technology and people want to take advantage. And if they’re buying a business they want to take advantage of it all the synergies as soon as possible. So there’s been more creative deal structures around now such, you know, such as shares or people retaining some of their equity, different types of structure which have done away with the earnout, which I believe has helped both the buyer and the seller.
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Way more than a decade ago. But you’re absolutely right. Yeah. There were a few less buys around. It was. It was an easier, pull to fishing, for sure. Yeah.
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Yeah.
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Yeah.
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Yeah.
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Yes. I mean, I think if you create a sustainable business,
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It’s going to be a business that you can really do what you want with
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all of those things that you’ve
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talked about there, whether it’s selling, whether it’s, being a part time owner or whether it’s, you know, a business you keep for the, for the long run as a, as an owner and
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continue to grow it.
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You can do all of those things. If you create something like a sustainable business and you’re able to work a say on the business rather than, than in it. So it gives you a huge amount of choice for sure. And selling a business that that’s what buyers are looking for. So you’re going to maximize your value,
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by doing that, there’s there’s no question about it.
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Yeah. There are different types of deals. You get some people that want to play on a bigger stage, or you get others that want to exit. So, yeah, the guys that want to play on a bigger stage who perhaps do an M&A because
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they’ve got a few years before retirement.
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So taking the business as far as they can. But they say, look, we want to get into the European market. We want to get into the US market and the cost of investment to do that would be quite high. So they go and sell maybe a percentage or something like that to
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a larger group.
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and then that way they can tap into all of the resources of that, of that larger group.
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And it’s often pretty successful. We call it playing on a bigger stage according to our strategy.
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Right. How I might, just in case I forget.
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Yes. It’s an interesting one. I mean, it’s more with the. When we do the execution of the deal, you have to make sure that you have those three elements in the deal. You’ve got to have that chemistry, the cultural match and the outstanding business proposition. Those are, really essential.
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if they’re all present, the chances are that they will be good.
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If one of them is missing that, I would definitely
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put a red flag on that. So I think that’s one area. And yeah, I think where you get a situation where the founder is still heavily involved but wants to leave that that’s something that’s going to be very difficult to sell. Buyers are quite astute in this industry and
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they will pick up on that
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even if you tell them otherwise.
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And so it’s often quite difficult to
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sell a business
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in that situation.
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Yeah.
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Yeah. I think that’s very key. Yeah.
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Yeah, certainly. But I think 3 to 5 years out is a is a great time to start thinking about it because, you know, that gives you plenty of time to make any changes to the, to your business. I want one of the things we offer is what we call it a commercial review of the business. And we will it will be like promote well, well, look at the business and say, you know that there’s too much founder dependency or there might be too much client dependency, or there may be some gaps in your second tier management team, all of that sort of thing.
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And there are other firms that also do the these reviews, and that might be something you do also. Jessie.
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that’s worth doing to sort of set the stall on where you are and where you want to get to, because it is a pathway and, and also, you know, to use people like you, Jessie, to actually work with, to get actually to prepare that business to sell, to actually get that business on a, on another level, because, you know, that that really does help when you’ve got all the boxes ticked in terms of, you know, what buyers are looking for and, and other things there, you know, perhaps look
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at it from a strategic angle as well to make sure it’s got a clear business proposition. You know, that you’re not a jack of all trades, master of none. And that and that sort of thing, because those sorts of things attract buyers as well. And get things right. One thing that I always amazes me is that for marketing agencies, they are the worst in the world in their marketing.
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It’s a real couple. It’s children syndrome. And that’s something that’s really worth doing, especially in this day and age where you’ve got AI and other things that that, you know, you might say, what got you here won’t get you there. And you really have to create a machine.
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That’s going to
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get you there.
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And I think one of the other things is you’ve got to bear in mind, if you’re planning an exit, the timing of it and what you want to do personally, people often say to me, when shall I sell? And my, my aunt’s them in this business where you have to be driven by passion to run these businesses is
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When do you want to sell? You know, so you’ve got to work out a timeline. So you might be five years out. And some people think, oh great, I’m five years out from selling. And you think selling is just going to happen like that, but it doesn’t. You know, you have to talk to various buyers. So what you might want to do is say, well,
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if I want to sell in five years, it’s going to take me.
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You have to allow a year in your mind selling a business takes between 6 and 9 months. But in your mind, you have to allow for a year. And
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you’ve probably got incentive payments for maybe 2 or 3 years at least after that. So that that could be up to four years.
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So though you think you might be starting in five years, actually you’re probably going to be starting next year. So it’s it’s you know, all of these things are worth bearing in mind.
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Yeah. Absolutely. Right. Yeah, yeah. You got to start with where you want to get to and plot all the stages.
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Yeah. So when we meet people for the first time, we can give people a pretty good steer on. You know, I guess we’re going to ask them what they’re looking to do, what they want to do, and and we can get from a pretty good steer. You know, they’ll tell us about their business, and we’ll be able to give them an idea on on value or potential value.
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and in that short conversation that we’ve been doing this a long time. So we see lots of agencies. So we can also give them a steer on what they might need to do to prepare for a sale, because it’s quite surprising a lot of people come to us and they just say, I want to sell my business, and they’re way off, creating something that that’s
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sellable, even though
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it could well be an excellent business.
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But they, you know, they’re
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still very involved in the business and maybe they’re not charging
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their salaries to the business. They’re just taking dividends. So it, you know, it sort of over inflates their profits. Different things like that. So
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it’s worthwhile
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conversation and, you know, very happy to give, any agency owner, you know, half an hour or so to,
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talk over their business.
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Yeah. I, I’m, I’m happy to speak with anybody at any time. Really. I, you know, some people come to us and they’re, they’re not ready to sell for ten years or whatever, but they just perhaps talk about their model or
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what the type of thing they want to create and check it with us.
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But things we like to know are our revenue, operating profit. If they don’t mind disclosing that, whether they’ve got reliance on heavy reliance on clients, the quality of their second management team, it’s it’s all of those sorts of sorts of questions. And, and most importantly is what they want to do. You know, what what they want to do with their business, you know, are they because very often, you know, they’re working hard.
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I’ve worked hard in this business. They want to create some sort of legacy. And, and, and also they want some sort of value for it at the end. You know what? What sort of money do you want to walk away with? So all of these things, we can, we can sort of reverse engineer and give them, give them the odds.
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Yeah.
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Yeah. Well, I’d be delighted to speak with anybody. Where we’re, Link team. You’ll find me, David ploys or find them. And I advisory. My email address is David be at M&A advisory.com. About it. But it’s on my LinkedIn. It’s on our website. M&A advisory.com is our website. Yeah. Be delighted to, to speak with anybody who’d like a few.
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Thanks, Jesse. It’s been a it’s been a real pleasure.
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And thanks to the listeners for
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listening.
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Agency owners. If you want to transform your agency to sustain and grow without your direct involvement, where you can stop working in the business and start working on the business, where you can free up your time, delegate work more effectively, price and position your services to finally get paid for what you’re worth and have the team run the day to day.
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Go to niche and control dot com slash case study. Now to learn more about leverage for growth and also to book a free strategy session with us, we’ll look at your systems determine exactly what you need to do in order for you to scale this year and to create a strategic plan so that you can live the life of entrepreneurship you’ve always dreamed about.
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Go to niche and control dot com slash case study now.
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