Life undeniably is a series of calculated risks. In fact, most of us take risks every day without realizing it. Almost everything we decide – from getting married, buying a car, having children and choosing a career – has some margin of risk.There is also risk involved when you run a business. For the PR agency owner, founder or CEO, the story is no different.

A good analogy can be seen in the case of buying stock. When you invest money with a financial advisor, they ask you about your risk barometer. Do you want to buy and sell more aggressively, which could lead to generating more risk but also suddenly be more rewarding? Or, do you want to be extra cautious and act more conservatively?

The same scenario applies to buying or selling a PR agency. What is tolerable risk for a seller and a buyer, or their risk barometer? 

If you are considering venturing down the road of a PR firm sale, the question of risk will inevitably come up in conversation. Sure, there’s risk in most everything, but agency owners considering M&A can absolutely minimize any degree of risk by taking into consideration a number of different aspects.

Risk is a Mindset

With any M&A strategy, it is essential to take sufficient time to think through every element of the sale opportunity. A key to reducing risk is to be as aggressive as possible during the “homework” phase to avert any potential issues that may arise along the way.

Start by conducting thorough research well in advance of a potential deal to ensure that both parties can bring positive synergies, a good cultural fit and total collaboration to the table. The journey also involves assurance and confidence that the seller’s agency has a solid track record going into the M&A process.Another way to strive for reassurance – and minimal risk – is for the seller to spend quality time with a prospective buyer. Carve out time to meet with a number of the interested firm’s internal team members, partners and clients, and always be open and honest to impact the question of risk positively.Keep in mind, you want to ensure that cultural collaboration is achievable – that everyone is comfortable and compatible with each other –  and that the chances of the dynamic changing significantly post-transaction are minimal.

Here are a few additional rules of thumb that can apply to both sellers and buyers as you work through the aspects of tolerable risk:

1. Don’t try to sell your PR agency if you have an account that represents more than 15 percent of your total revenue base.

1. Make sure that your senior management team can take over the running of the business at the appropriate time.

1. Run the business to take out an industry standard compensation package – and still make a reasonable profit.

1. Produce P&L’s that are professional and accurate.

1. Have a carefully-planned time management system in place.

1. Give your key senior managers phantom stock.

Defy the Odds of Failure

The concept of risk is an often overlooked element in the thinking and mindset of today’s PR agency sellers and buyers. Yet, risk is necessary, and risk can be useful in M&A.The takeaway is that the type of risk should be tolerable and not so overwhelming that you can’t sleep at night. Instead, I suggest to agency owners that they learn how to make risk work in a positive way moving forward, ideally along with guidance from an experienced facilitator like The Stevens Group.

By equipping yourself with the necessary information, doing your homework, conducting proper research, and meeting all the right people, you can minimize any potentially overwhelming or negative scenarios that could arise during an agency sale.So, don’t avoid the process of being acquired simply because you think it’s too risky. The truth is that you could potentially come out better on the other side – both personally and financially. So see what the risks are, address them, deal with them, and make a goal to overcome them.