How Much Can You Sell Your Agency For? THREAD

As more businesses shift to a remote model, Digital Agencies continue to grow rapidly, with a rough 340 billion in revenue in 2020 With a fairly low barrier to entry, an agency is great source of primary or secondary income

At some point you may want to exit & move on to bigger and better things Here's how agencies are valued:

Valuation depends on many factors, but *generally* speaking: If your EBITDA is under 1 million USD per year: You're looking at a 1-2x multiple* *At this level, net profit may be used You can expect offers of 25 to 50% down with the remainder tied to performance metrics

If your EBITDA is over 1 million USD: You can expect a 3-5x multiple or higher At this stage you can also expect 80% to 100% of the money up front

Other factors taken in to consideration: -MRR (Monthly Recurring Revenue) - Churn rate -Avg contract term (The longer customers are locked in, the better) -YOY growth -Cash Flow -Number of clients (more clients, less risk & vice versa)

-State of Operations (Are roles, SOPs, templates & automation tools in place or does the agency stop functioning when you leave?) - Age of Company -Number of contractors & employees -Business in the pipeline -Assets (physical & digital assets such as proprietary software)

Now that you know what goes into agency valuations, you should aim to build an agency with: ✅ High MRR based biz model ✅ 12 month+ contracts ✅ <10% Churn ✅ Strong SOPs, systems & automation

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