Agency Valuation Calculator

Revenue vs. Profit Multiples

Agencies are typically valued using two methods: revenue multiples (1–3x annual revenue) and Seller's Discretionary Earnings (SDE) or EBITDA multiples (3–6x). Revenue multiples work well for smaller agencies or those with thin margins. SDE multiples are used for profitable agencies and reflect the buyer's ability to earn income from the business.

Factors That Increase Value

• Recurring revenue: Retainers, monthly retainers, and subscription-like arrangements reduce risk and command higher multiples
• Client retention: High retention rates show stable relationships and predictable cash flow
• Revenue growth: Consistent year-over-year growth signals a healthy business
• Client concentration: No single client over 25–30% of revenue reduces concentration risk
• Owner independence: Businesses that run without the owner's daily involvement are more valuable
• Documented processes: SOPs and systems make transition easier for buyers

Factors That Decrease Value

• Project-based revenue: One-off projects create unpredictable cash flow
• Client concentration: One or two large clients create significant risk
• Owner dependency: If the agency can't run without you, buyers will discount the price
• Low margins: Agencies with thin margins are harder to grow and less attractive
• Poor documentation: Undocumented processes make handover difficult

When to Consider Selling

Consider selling when you've built a sustainable, profitable business and want to exit or diversify. Many owners sell after 5–10 years when they've hit a plateau or want liquidity. Preparing for sale takes 1–2 years: clean up financials, document processes, reduce owner dependency, and build recurring revenue. The best time to sell is when you don't need to—a strong negotiating position attracts better offers.

Improving Your Valuation

Start improving valuation 2–3 years before a potential sale. Shift toward recurring revenue (retainers, monthly support). Reduce client concentration by diversifying accounts. Create documented processes and systems. Hire or promote key staff so the business isn't dependent on you. Clean up your books and ensure financials are audit-ready. These steps can increase your multiple by 0.5–1x or more.

Not all agencies are valued equally. The type of work you do, your revenue model, and your market positioning all influence the multiples a buyer will pay. Here are realistic ranges based on recent agency transactions:

• Marketing agencies: 0.5–1.5x revenue or 2–4x SDE. General marketing agencies sit in the middle of the range. Those with strong digital capabilities, measurable results, and retainer-based billing trend toward the higher end. Traditional agencies focused on print, events, or PR without recurring engagements tend toward the lower end.
• Digital agencies: 0.8–2x revenue or 3–5x SDE. Digital agencies command a slight premium because of higher demand and more scalable service models. Full-service digital shops with development, design, and marketing capabilities are particularly attractive to acquirers looking for one-stop solutions.
• SEO and content agencies: 1–2.5x revenue or 3–6x SDE. These agencies often earn the highest multiples in the space because of their naturally recurring revenue model. SEO work requires ongoing effort, which translates to long-term retainers. Agencies with documented ranking improvements and strong client retention are especially valuable.
• Design agencies: 0.5–1.2x revenue or 2–3.5x SDE. Pure design agencies tend to have lower multiples because work is often project-based and heavily dependent on creative talent. Agencies that have productized their design services (e.g., subscription design models) or added UX/UI strategy can command higher valuations.

These ranges assume a healthy, profitable agency. Agencies with declining revenue, poor margins, or heavy owner dependency will trade below these benchmarks regardless of type.

Just as certain qualities increase value, several red flags cause buyers to discount an agency's worth—or walk away entirely:

• Owner dependency: If the founder is the primary salesperson, the main client contact, and the creative lead, the agency is essentially buying a job. Buyers will either pass or demand heavy earn-out structures tied to the owner staying on.
• Single large client: When one client represents 30–50% or more of revenue, the entire business is at risk if that relationship ends. This is one of the most common deal-killers in agency acquisitions.
• Project-based revenue only: Agencies that rely entirely on one-off projects have no revenue visibility beyond the current pipeline. This forces buyers to assume higher risk and offer lower multiples.
• Key person risk: If critical institutional knowledge, client relationships, or technical skills reside with one or two employees (other than the owner), the agency is vulnerable. Losing those individuals post-acquisition could significantly impact delivery and retention.
• Declining revenue or margins: A downward trend in the trailing 12–24 months signals structural problems. Even if past years were strong, buyers price based on trajectory, not peak performance.
• Unstructured operations: No CRM, no project management system, no documented workflows—these signal a business that relies on tribal knowledge and will be difficult to integrate or scale post-acquisition.