Depending on whom you ask, marketing agencies of less than 2M USD in annual profits sell for a 2 to 3.5 multiple of their EBITA (earnings before interest, taxes and amortization).
This means that if your agency makes 200k USD in EBITA (profit roughly), then it will sell for 400k to 700k USD. Unless you want to straight-up close your agency (to do something different), this doesn’t seem like an amazing deal to me. This is the profit you could make in only 2 to 3 years, and you are losing your vehicle of opportunities and an entire team that can support you.
And of course, this price is dependent on finding a seller which largely depends on having a unique focus or niche, a productized or templatized service, and a lead generation funnel that works without the agency owner.
Since I am running a mid-six-figure agency largely based on my public speaking, webinars and community, this is not the future plan I can rely on.
Instead, I decided to stay small (up to 1M USD annual revenue) on purpose and focus on cashflow, salaries, profits and free time. I am basically optimizing for a calm company, joy at work and integrity, instead of SOPs, LinkedIn outreach and automated Asana workflows.
A side note: A good agency trick to optimize costs (and grow your EBITA and thus multiple) is replacing senior consultants with juniors. This means that the senior can oversee more clients on a strategic level, whilst the junior is executing the work. Sounds good on paper. But whoever got sold by a senior or salesperson, and then was passed on to a junior that just started three months ago, knows that it is not that pleasant, in reality.
This is another reason why Flow SEO stays small on purpose. All clients are managed by experienced senior SEOs.
So, how do we manage to increase profits and salaries if not by adding more clients? Well, firstly, Flow SEO does grow every year — just slowly and step-by-step. Secondly, we have increased our prices and minimum retainers since I first started 2.5 years ago.
But, the biggest lever is the client-retention rate.
We call this our North Star metric. It is the one number that everyone in the company is accountable for. The one metric that is indicative of future growth and will surely tell us if we are heading in the right direction.
So, client retention rate and the freedom it creates are my “exit”.
Did you know that one of our consultants took every Friday off in winter 2021 to go skiing, whilst at the same time achieving outstanding results for our clients?
This is what building a calm company is really about!