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Cary Hatch Contact Information

LinkedIn: https://www.linkedin.com/in/caryhatch/

Email: chatch@caryhatch.com

Elizabeth Shea (00:43)

Hello everybody and welcome again to Branching Out. We are so excited to have the illustrious and very formidable Cary Hatch with us today in the studio. So Cary, so glad to have you here with us today.

Cary Hatch (00:57)

Entirely my pleasure, I assure you.

Elizabeth Shea (01:00)

Well, now, Cary comes to us as basically a brand advocate, a chief evangelist. She's been an entrepreneur for many, many years in support of the entrepreneurial community. ⁓ I'm so honored to have you not only on our advisory board, but here in the studio today to talk about your experiences in selling your agency several years ago. So ⁓ maybe we can start just from the basics. In the beginning, can you tell me a little bit about ⁓ the process that you went through in selling your business and what made you decide that that was an option for you?

Cary Hatch (01:30)

Well, you know as we both know sometimes life takes you down different paths and where you arrive isn't always where you thought you'd arrive nor was it your goal but There's a certain amount of serendipity with that You're I know you're aware that I started out on the creative side of the advertising business as an art director So becoming an owner was really not first on my list and certainly running a company for 30 or 40 years was way off base for me at that time.

But I am hopelessly in love with what I do. I love the industry, albeit I was a perfectly mediocre art director. I grew further into strategy and business development and understanding the economics of advertising as an economic driver and the role that that plays in growing businesses successfully for others — not just yourself. That was a joy for me.

So, when I first considered the notion of selling my agency, it was because somebody came courting me. I also think you're aware, I bought my agency at the age of 30. So, it was some years down the road when I thought, oh, interesting, you'd like to acquire my firm. How fascinating. What's in it for me at that point? I was relatively young. I was 45 at that time, so I'd been doing it for 15 years or so. And I thought, this is a good opportunity to align and address some of the things that I was passionate about— scaling the business, increasing the brand value of the work that we were handling for much larger brands and obviously much larger budgets. By throwing my lot in with someone else, would that make us more competitive, would it expand our services? So, this made a lot of sense.

And then over several decades, honestly, I've walked down the aisle with people about five or six times, so a bit of an untraditional learning curve shall we say. Sometimes that's good and sometimes not so much. Some of them were very large and publicly traded; there was a firm out of Canada and then other smaller independent organizations as well. And not all ad agencies. Some of them were PR firms and some of them were more about media services and kind of expanding their own skill portfolio. So, it became interesting to me to explore that. Like most entrepreneurs, I think most of us feel that it never hurts to have a conversation.

Even if it's a big nothing burger, you could meet some people, they could refer you to other people, who knows? It could be a partnering situation; you can do joint ventures with them and other sizable pieces of business. But that's really how that came to me— it was incoming fire as opposed to me saying “strategically, from the early on years in 1987, I'm going to grow my firm and sell it.”

Elizabeth Shea (04:55)

Right. Can I ask you why you walked away from some of those deals?

Cary Hatch (05:00)

Sure, no, I'm happy to share that, you know, every fit is not a fit and sometimes you feel that it is a fit and you only . . . well, think of it as dating. Right? Sometimes, know, tall, dark and handsome doesn't actually work for you.

Elizabeth Shea (05:05)

That's a good analogy.

Cary Hatch (05:22)

You know, does that person align with your value system? Do they pursue business in the way you do? Are they financially stable? There are so many things that you learn along the way, and very much like in my dating career, sometimes I wasn't very efficient. I had one suitor that took almost two years for me to realize that it wasn't a good fit but there were a number of reasons. Some of it was timing, some of it was strategic alignment. The industry changes, as you know, so there's that iteration. There are all kinds of things in the finance category — what multiples are going for, for your type of firm and things like that. Then there’s those kinds of pop surprises as you're going through each and every suitor, and reputationally it doesn't align with your value system.

Elizabeth Shea (06:24)

Right, that is so important. I've heard that time and time again, that the values of the two organizations really need to be in alignment or it could be a challenge post-transaction. From that standpoint, when you finally did decide to sell, know, what kind of preparation did you feel like you needed to do? Or had you been doing it so many times in the past that you felt prepared when it finally came time to make the decision on this last one with Hart?

Cary Hatch (06:50)

Honestly that was part of it because I started . . . I mean I sold when I was a couple years ago when I was 66 and my first overture was at the age of 45. So, in that close to 20-year period I had quite a bit, and some of them went virtually to closing. Two of them had closing dates.

Elizabeth Shea (07:08)

Wow.

Cary Hatch (07:17)

Yeah, so back to values alignment. One of the more major players and opportunities in the regional market, as opposed to international or national, a week before, wanted to change the terms. And I know we're going to talk about this a bit, but there were kind of two or three things that were very, very, very important to me. And I knew and I couldn't live without them. My people, my clients, and then the money came third. It was in that order. And one of my provisions was that this suitor would keep my people for at least a year. And that was agreed to. Then a week before closing, I'm not taking your people.

Elizabeth Shea (08:13)

Wow, but you're a people business — that's flies against conventional wisdom.

Cary Hatch (08:19)

Those are your real assets in service business! So, it was a very quick, then we don't have a deal.

Elizabeth Shea (08:21)

Right, yes. So, you stood firm on some of the things that you really believed in, which I think is very admirable. I think that's a really good lesson for people that are exploring this opportunity for themselves to be able to really think through, what am I willing to give up? Because it's not always about the valuation and the money, it's about the terms. So, I totally understand that.

Now that the deal is done, is there anything you would have done differently in this final transaction? Were you happy? there any advice? What would you have done differently?

Cary Hatch (09:09)

I think there are several things I could have done better.

Elizabeth Shea (09:13)

Or what do you feel like you wish you'd known then that you know now?

Cary Hatch (09:17)

Asking more questions about the new leadership team and where my fit would be. I probably should have done a bit more dialogue and discussion. Where can I contribute? It's very important to me, and this comes through a lot of introspection, which is the number one thing I think most owners need to have an honest, solo discussion with themselves.

What is it that you need to feel good about this transaction, assuming you're not in a desperate situation to sell? I was fortunate enough not to be in that situation. Frankly, I was very lucky, because the suitor that I ultimately sold to was a gentleman that I knew for over 20 years through our industry association, the 4A's — the American Association of Advertising Agencies. So, we knew that we were aligned with integrity and how we conducted business, ethical conduct. There was a tremendous amount of trust there that you wouldn't always have going into a deal. This was a gentleman who was in my CEO forum group for over 20 years where we were reporting financials, ups and downs and everything. So, when it came to be that the prior suitor dropped out, I was introduced to this opportunity through our industry association. It was kind of a funny story if you're interested in hearing it.

Elizabeth Shea (10:57)

Yeah, I'd love to hear it. So it ended up being someone you knew and trusted!

Cary Hatch (11:09)

With the five prior guys (and they were all gentlemen), you're on your own. It's truly like a blind date. But in this case, I called the 4A's and I said, well, I wanted you to know that the suitor that I had, which was a regional player, isn't going to pan out and you need to start charging me dues again. And they said, “okay, no big deal.” Cause I thought the suitor would take over those incremental expenses.

And they said, “would you be interested in talking to another acquirer? And I said no. Then I stopped — I paused — and I said, “well, yeah, let's talk about that." “Where is this person located?” If he’s on the West Coast, that's not going to work because at that time all of our work was generally Eastern Seaboard, a little bit in Canada and some in Europe. They said, “no, he's east of the Mississippi.” And I said, “okay, what state?” Because I'd done a lot of stuff through the 4A’s on a national level, so I knew some players. And they said Ohio. And I said, “is it Mike Hart?” And they said, “yes, it is.”

Oh my God, I've known Mike for 20 years! I call up Mike and I say, “I didn't know you were looking to acquire agencies.” And he said, “well, Cary, I knew you had a suitor.” And I said, “well, Mike, that suitor went away. This is not the prom. This is business. Let's talk.”

Elizabeth Shea (12:22)

Right, right. Sometimes it just happens in your backyard with people that you know and how amazing! That's a great story. I appreciate you telling me that.

Cary Hatch (12:54)

Serendipity!

Elizabeth Shea (12:57)

Yes, very serendipitous. So, how has it been since then?

Cary Hatch (13:01)

Terrific, very talented people. All my aspirations that I mentioned earlier about scaling and just more firepower, frankly. At the time of sale, we didn't have a PR department or practice, and they brought that and I loved that. The analytics, the media buying power, the trading desk and everything was such an acceleration of where I knew we had to go to remain competitive for one thing.

Elizabeth Shea (13:38)

So, to shift gears a little bit around the financial metrics and the valuation and the multiples that you get, what did you do to prepare yourself to understand what would be realistic and what you might be able to receive? Can you talk about that?

Cary Hatch (13:53)

So, a couple different sources. Quarterly, there used to be a newsletter that would come out that would talk about the most recent transactions, the deals, what their multiples were, what the makeup was for that agency. Was it a B2B agency? Was it B2C? You know, was it more PR or media or creative or full service? You know, so you kind of could keep your finger on the pulse of any trends and actually that was educational for me because when I the first offer that I got like in when I was 45, the multiple from my agency at that time with my profile was seven or eight and by the time I sold it was more like three or four.

Elizabeth Shea (14:29)

Wow. Okay, so it definitely changes.

Cary Hatch (14:52)

It changes, so you have to be aware of that. That also was a driving force for me to, at different junctures, pull in a PR practice, because that was a big revenue stream with better margins, frankly, and a little more reliable. But that's probably because we're on the East Coast, and it's very communication centric. And then the 4A’s — again, another plug for the American Association of Advertising Agencies — they have a wonderful resource for tracking data as well. Now, they actually have a matchmaking discipline that will help you. Early on, Mike Hart and I were kind of their initial case study, if you will, but they have the opportunity because they are the single largest advertising-based industry organization in the country. And it takes something to be certified as a 4A's agency.

So, you've got quality people with a national footprint. If you're looking to consider selling, at least in my industry, that's the deal.

Elizabeth Shea (15:59)

I’ll take a look at that! Well, timing matters because multiples can change. So, there are times when advertising might have ranked higher than PR or maybe PR would rank higher than advertising or digital marketing. So, it really makes sense to pay attention to what's happening currently. And I like to say that you should sometimes think about exiting when the market's ready versus when maybe you're ready. Of course you want to be ready, but it's something to be considered. So that's really interesting and fascinating information.

Cary Hatch (16:37)

And you have to wait for those stars to align. Because I saw those multiples changing, I changed my own personal philosophy in what I was investing in, and honestly, as an owner, what I was taking as compensation. So yeah, you have to factor that into your entire strategy and your physical philosophy.

Elizabeth Shea (17:02)

Right, right. Yes, when working with perhaps an investment banker, there might be some counsel that they give you, but at the end of the day, it is also about just what you're personally interested in creating for yourself. Amazing.

Cary Hatch (17:19)

Correct.

Elizabeth Shea (17:21)

Okay, so Cary, this is so interesting. I'd be curious to know when you did finally make the decision, were there other critical decision factors that entered into your mind that helped you to realize this is the right time?

Cary Hatch (17:37)

So, in addition to making the right fit, the recognition of the velocity of change in the marketplace— AI specifically — and having that honest discussion with myself, what would it take for us to remain competitive and relevant in the marketplace? Was I truly willing to invest the time and the money and the talent to get us there?

That honest discussion led to even furtherance of my interest in a sale with someone who could make us more successful. Because I thought I was looking at probably another half million dollars to stand us up in a way to allow us to perform at the level that was necessary at that point in time. And that was three years ago.

Elizabeth Shea (18:20)

Very, very good point. The agency landscape is changing so much and you're exactly right. You need to ask yourself, were you ready to pivot or to enhance or influence? So very interesting point. Have to have an honest conversation with yourself in terms of your industry and what's required to move forward.

Elizabeth Shea (18:46)

So, what's interesting, Cary is that you've been through this experience, and you talked about being introspective. Can you talk a little bit about what it was like basically handing over the reins to an acquirer and what that experience was like for you? What could you share with our listeners that they might be able to have to expect?

Cary Hatch (19:09)

That's that deep one-on-one conversation with yourself. Number one, what will it take for me to sell and what will it take for me to be happy? Some of those answers are kind of surprising. I already talked to you about my priorities, but personally, what does it mean to not be the queen bee anymore? Very, very hard left turn for me.

Well, you can imagine. At the age of 30, I bought my company, and I've been running it ever since. And generally speaking, not always, but what you say goes. And reporting up is not always something that came easily to me. Being part of a dialogue and being questioned when I had X amount of years of experience. . . So how you accept, effectively, a demotion. You're a contributor, but you're not calling the shots. And infrequently in my case, seeing things that I think could have been remedied, that not everybody agrees that they even need to be remedied. So, who am I to come into what truly was a virtually 60-year organization that I was now at the Washington DC office of to provide seasoned expertise on what I thought could be better. I think you have to be honest with how that feels day-to-day. I think you have to be honest about just your new rank.

Elizabeth Shea (20:55)

So, you didn't think, “wow, I don't have to worry about these things anymore”? Were you expecting to have that reaction or that experience?

Cary Hatch (21:11)

It never occurred to me, and I think that was a blind spot. I think that was a blind spot and shame on me for not recognizing that, but I bet you a lot of people go through that.

Elizabeth Shea (21:15)

I can tell you for a fact right now, and you'll hear from other people on this podcast, everyone says the exact same thing. It was not something that they anticipated. I know I went through that. I experienced, well, why wouldn't we do it this way? Because that's how we've been always doing it. So, it's a tough transition, but I think understanding, maybe having the sense that you should expect that is going to be helpful to some of our listeners.

Cary Hatch (21:46)

Well, I also think you have to trust your instincts. And when you early on evaluate the opportunity and the people you're going to be working with, what are your non-negotiables? I always found I was so lucky, lucky me, that I found this serendipitous union at the right time with the right people. Not all, but many of the clients and staff stayed for some period of time. I feel like I lived up to my own goals, which was important because, you and I, we've been in the business a while and you see lots of times people come in and everyone's fired and they're just taking the contracts and that's just the way it rolls. But in a people business, you know, that just doesn't work. It really doesn't. And then what's the fun factor? What fun can you have in this new environment in your new role? I'm not a golfer. My head is still in the business. Even today, it's still in the business. My husband doesn't understand that — it's like, “why are you going on another crusade?” Because these people need help!

Elizabeth Shea (22:52)

Hahaha. It's hard to give up, right? It's very hard to give up.

What about your people? Did you share with them your journey? Were they aware that you were in the process of selling? There's been a question that some people have asked, at what point do I tell my people that I'm looking for an exit? Because an exit doesn't have to mean goodbye. It just means we're moving into a different phase. So, can you share a little bit about what your team knew and how they approached it?

Cary Hatch (23:36)

Well, even the suitor that was just prior to the one I actually sold to, they were aware. Actually, I took the opportunity, this might be interesting and a tip for some of your viewers and listeners, that I hired my suitor as a subcontractor on a very large contract. So, you have an opportunity to test drive that relationship.

Elizabeth Shea (23:48)

Oh, that's a great idea.

Cary Hatch (24:06)

And not only was it apropos for the size and scale and discipline that they brought that augmented a long-standing client and contract with us. It made sense organizationally, financially, but it allowed our teams to work together. And there were pros and cons, but at least, again, back to the dating analogy, you're going on several dates as a team, not just one-on-one.

Elizabeth Shea (24:36)

Right. Bringing the whole family with you.

Cary Hatch (24:41)

Bring your mom! Bring your media director! Bring your creative director!

But it was important to me because, keep in mind I'd already gone through several opportunities or false starts I guess you would call them. See, I was never driven to sell. I didn't get in the business to sell. Every one of these opportunities really came our way. At one point in time, I did hire a consultant and a broker. It didn't work out that well for me.

Elizabeth Shea (25:02)

Yeah, it doesn't always and not everyone has that opportunity to work with a broker or it typically is the fact that you are visible and companies come to you because they're intrigued and interested in acquiring your talent, especially now.

We've had a lot of our clients be approached and that's just the nature of the landscape right now.

Cary Hatch (25:35)

No, you're right. Well, and that's the other thing. You asked about early on, kind of thinking through the approach and how you looked at that. I know the classic thinking is “to the minute you start your business, think about selling it.” Well, that was never . . . I was in the business for the business. I love advertising and I actually felt like I had a business to support my habit.

So, but with that said, with that admission, I became fully aware that how you keep your books, your external audits, your compilations or reviews or whatever, elevating your own profile and stature, being an industry leader, doing all those things help formulate a more successful transition because you've established a track record.

I'll give you one quick example. One of the suitors was kind of checking around on me and asked a PR firm to say, well, what do you think MDB's annual gross income is? And they said, well, I think it's X. Well, that was two times what we were doing. But the reputation carried us there.

So, for CEOs that don't like going out and being part of a larger industry event or community or taking a stand on something, you're missing a real valuable exercise towards selling your company.

Elizabeth Shea (27:19)

Yes, yes. And so not to give a plug for TreeFork Strategies, but that's our whole goal is to make sure that companies are visible in the right way to increase their valuation. So, I didn't even plant that, but you said it yourself! You were so visible that yes, there's going to be the perception that you're bigger than you are, you're more profitable than you are. And that's an important strategy to think about.

So, let's shift gears a little bit to kind of post transaction. You talked a little bit about what you would have done differently. Anything else you want to add that you think would be useful for listeners? Because it's not just about the buildup.

And by the way, not to sidetrack, but you said employees, then clients, and then money. We really haven't even talked about the money, but we'll get to that in a minute. Is there anything differently that you might've done or advice you can give post-transaction for how to adjust how to move forward and think about what your next act is because you're still very active in the community and doing a lot of other things.

Cary Hatch (28:24)

Yeah, I think it's an important exercise and I'm still discovering things about myself. But what I said earlier is really true. I need a place to go, people to work with, and something to contribute to. I still need a purpose and that has led me to serve on some boards in some pretty interesting positions, including governance boards, things that you would never think an art director would be on.

And I've been very active on the NARB, the National Advertising Review Board which advocates for the voice of the consumer and truth in advertising. So those kinds of things make me whole. I love the people in my industry. I'm contributing something and I have purpose. I've traveled internationally. I don't play golf. I played tennis, I've done all that, but what gives me the greatest joy is using whatever scar tissue I have and whatever experience I have to help other people. So, people have come to me like they've come to you to say, hey, emotionally, I'm not a CPA, I'm not a lawyer, what does it take to sell your firm? And I'm very candid with them. That's why the role that you're serving is critical to helping people go through those hoops.

Elizabeth Shea (29:27)

Right. And there are hoops, certainly, and ones that may not be obvious or evident in the beginning.

This is fabulous. I really appreciate your time and to the extent that you have other advice or counsel to share. Are there are any lasting comments you'd like to make?

Cary Hatch (30:09)

I would say one of the things I've noticed not just about myself but about others and particularly female entrepreneurs. We don't always take a beat to appreciate the journey. I was reflecting last night on the fact that, who knew that a ten-thousand-dollar loan from my parents to buy my company in 1987 would help create the foundation for a love affair with an industry that I am hopelessly in love with and have made a fairly good life for myself and my family. And I want to believe I've contributed to the industry.

So, you know, take a moment to think not just about your next step, but reflect upon how much you've accomplished. Because not everybody can be successful. And we hear the stats on that all the time. But the tenacity, the grit that it takes, and the community that it takes, I was heavily relying upon my industry community, the greater Washington community, certain all businesses, to help me grow into the person I needed to be for my staff, my clients, and my family.

Elizabeth Shea (31:30)

I mean, MDB Communications has just been a force of nature in this region in particular and nationwide. So, hats off! I'm just so proud to have you on the show and to have you be part of our board. I'm looking forward to everything that we're going to do together in the future. Thank you so much, Cary.

Cary Hatch (31:47)

Totally my pleasure. Onward and upward!