What’s Your Agency Actually Worth?

What’s Your Agency Actually Worth?

A Founder’s Guide to EBITDA Multiples

If you’ve ever had a beer (or a glass of wine or a soft drink) with another agency owner and the conversation has drifted to “so what do you think we’re worth?”, you’ll know it usually ends in vague guesses, a few war stories about a mate who sold for “loads”, and no real answer. That’s fair enough, agency valuation isn’t intuitive, and most of what founders hear is secondhand and slightly distorted.

So let’s actually unpack it properly. This isn’t a definitive number-crunching exercise (that’s what a proper valuation and due diligence process is for), but it will give you a genuinely useful framework for thinking about what your agency might be worth, why buyers value agencies the way they do, and what actually moves the needle if you’re planning an exit in the next few years.

Why EBITDA, and not revenue or profit?

Most small business owners think in terms of turnover or “what’s left in the bank at year end.” Buyers think in EBITDA, Earnings Before Interest, Tax, Depreciation and Amortisation.

The reason is simple: EBITDA strips out the noise. It removes how you’ve chosen to finance the business (interest), how the tax system happens to treat you, and non-cash accounting adjustments like depreciation. What’s left is a rough proxy for the cash-generating power of the underlying operations, which is what a buyer is actually purchasing.

For agencies specifically, EBITDA also matters because revenue is a genuinely poor indicator of value. Two agencies can both turn over £2m, with one running at 25% margin and the other limping along at 5%. A buyer isn’t interested in your top line for its own sake, they’re interested in the profit engine underneath it, and how repeatable and defensible that profit is.

The basic mechanics of an EBITDA multiple

The standard shorthand for valuing a business is:

Enterprise Value = EBITDA x Multiple

The multiple reflects risk, growth prospects, and how attractive the earnings are considered to be. A stable, diversified agency with long-tenured clients and a strong leadership team beneath the founder might attract a multiple in the mid-single digits. A founder-dependent agency with three clients making up 70% of revenue will sit at the low end, sometimes uncomfortably so.

UK creative and marketing agencies typically trade somewhere in the region of 4-8x EBITDA, though this varies hugely by agency type, size, specialism and buyer appetite at the time. Larger, more sophisticated agencies with strong recurring revenue can push beyond that range, small, generalist shops with thin margins and high client concentration can sit well below it. Treat any multiple you hear quoted as a starting point for a conversation, not a guarantee, the range genuinely is that wide.

What actually determines where you sit within (or outside) that range comes down to a handful of recurring themes: how much of your revenue is retained versus project-based, how diversified your client base is, whether the business can run without you in the room, your growth trajectory, and how clean your financial reporting is. We’ll come back to some of these.

Enterprise Value vs Equity Value

The distinction that catches founders out!

This is where a lot of founders get a nasty surprise partway through a sale process, so it’s worth spelling out clearly.

Enterprise Value (EV) is the value of the operating business itself, the thing the EBITDA multiple calculation gives you. It represents what a buyer is paying for the trading operations, independent of how that business happens to be financed or what cash and debt currently sit on the balance sheet.

Equity Value is what actually lands in your pocket. It’s calculated as:

Equity Value = Enterprise Value − Net Debt (+/- other adjustments)

Net debt here isn’t just obvious things like a bank loan or a director’s loan account in your favour. It includes overdrafts, finance leases, deferred tax liabilities, and, importantly for agencies, things like unpaid Bounce Back Loans or CBILS balances still on the books.

Cash sitting in the business typically works the other way: if there’s surplus cash beyond what’s needed to run operations day-to-day, that generally gets added back to you on top of the Enterprise Value, because the buyer isn’t paying for cash you could simply take out yourself before completion.

So if your agency is valued at £2m Enterprise Value, but you’re carrying £300k of debt and only £50k of surplus cash, your actual Equity Value, the cheque you receive, is closer to £1.75m. Founders who’ve mentally spent the EV number are often disappointed when the equity number comes through in the Heads of Terms. Better to understand this early than be blindsided during negotiations.

Normalised EBITDA, why buyers will adjust your numbers

Here’s the part that surprises almost every founder going through this for the first time: your ‘generalist’ accountant’s EBITDA and a buyer’s EBITDA are rarely the same figure.

Buyers will “normalise” or “adjust” your EBITDA to reflect what the business would earn under new ownership, stripping out anything that reflects your personal choices as an owner rather than the underlying economics of the business. Common adjustments include:

– Your own salary and dividends. If you’re paying yourself below market rate (or taking most of your reward as dividends to be tax-efficient), a buyer will add back an appropriate market-rate salary for whoever replaces you, which can reduce EBITDA meaningfully if you’ve been underpaying yourself on paper.
– Family members on the payroll who aren’t doing a commensurate amount of work.
– One-off costs, a lawsuit, a big rebrand, a failed office move, that won’t recur.
– Personal expenses run through the business, from the car to conference “research trips”.
– Above or below market rent if you own the office personally and charge under/over rent.
– Discretionary spending that a new owner might choose not to continue.

Some of these adjustments work in your favour and push EBITDA up (and therefore push valuation up), others work against you. The net effect is usually a fairly forensic, back-and-forth negotiation, with the buyer’s advisors pushing to normalise EBITDA downward and yours pushing back. This is exactly why clean, well-documented management accounts and a good working relationship with your accountant in the years before a sale pay for themselves many times over, a buyer who has to dig for clarity will price in that uncertainty, usually against you.

What actually moves your multiple

Since the brief is “valuing your agency,” it’s worth being honest that the multiple itself is where most of the value creation actually happens, far more than trying to inflate EBITDA in the final year before sale, which buyers will see through anyway.

A few things consistently push multiples up:

Recurring and retained revenue. An agency built on retainers and long-term contracts is inherently less risky to a buyer than one reliant on project work and pitching. If you can show revenue visibility 6-12 months out, that’s worth paying for.

Client concentration risk. If one client is 40% of your revenue, that’s a red flag a buyer will price in heavily, because losing that client post-completion tanks their return. Diversifying your client base before a sale process is one of the highest-leverage things you can do. Aim for no client being more than 20%.

Founder dependency. Can the agency win new business, deliver for clients, and run day-to-day without you personally in every important room? If the answer is no, buyers will either discount the price or insist on a lengthy, binding earn-out to de-risk your departure.

Team and leadership depth. A capable second tier of management that clients and staff trust is worth real money, because it’s what makes the business transferable.

Growth trajectory and market positioning. A specialist agency in a growing niche, with a clear point of difference, will generally out-multiple a generalist agency competing purely on price.

Financial hygiene. Clean, accurate, well-organised accounts and management information reduce perceived risk and due diligence friction, which buyers reward.

None of these are things you fix in the three months before you go to market. They’re things that, done well, compound over two or three years, which is exactly why it’s worth starting the conversation with your accountant well before you’re anywhere near ready to sell.

Where this leaves you

Valuing an agency properly means moving past “what multiple do agencies go for” and understanding the mechanics underneath: what EBITDA actually is, how it gets normalised, the gap between Enterprise Value and what actually lands in your bank account, and which levers genuinely shift your multiple.

If you’re a few years out from a sale, or just want a realistic sense of where your agency currently sits and what would move the needle, that’s exactly the kind of conversation we like having. Book a discovery call, no jargon, no hard sell, just a clear-eyed look at where you stand.