Several years ago, an agency owner shared: “I want to sell my agency for $10 million in eight years so I can retire.” He wanted to know if he was on track to get that exit price.
Your ideal exit might be lower or higher than $10 million. Consider:
- Across my clients, target exit prices have jumped from $3-5 million to $5-10 million, with some wanting $100 million or more.
- A small agency might sell for just $1 million, potentially via an acqui-hire.
- A big agency will sell for more—or a lot more, like when Interpublic Group paid $2.3 billion to buy Acxiom Marketing Solutions.
If you’re focused on running an Equity agency, let’s look at what it would take to sell for $10 million or more. Your target might be closer—or further away—than you think. [Last updated: February 2025]
Not planning to sell your agency? Totally fine—you’re probably running a Lifestyle agency. But knowing this info is still helpful if you get an unsolicited acquisition offer.
What drives the offer amount?
When someone buys your independent agency, they’re typically buying the agency’s future stream of profits. Higher profits and an in-demand agency = higher selling price. Lower profits and a run-of-the-mill agency = lower selling price.
For independent agencies with less than $10MM in revenue, the usual formula is for acquirers to pay a “multiple” of EBITDA (earnings before interest, taxes, depreciation, and amortization). Ask your accountant about your EBITDA—this might be the bottom line on your Profit & Loss (P&L) Statement, but it may not. It depends on how your accountant set up your P&L, how you’re paying yourself, and other adjustments.
Smaller agencies might get valued based on Seller Discretionary Earnings (SDE). Larger agencies ($10MM+ in revenue) might get valued based on a multiple of revenue.
What’s a normal EBITDA multiple for selling an agency?
It’s all negotiable—but a 4-6X multiple is typical for agencies. That’s via Punctuation, the M&A advisory firm for agencies. Multiples typically assume something like a 3-year weighted average of EBITDA, after adjusting to ensure EBITDA reflects market-rate compensation to the owner(s).
Keep in mind that to get your ideal multiple, you need to get in front of the right acquirer. For more on that, see my article on creating a Dream 100 acquirer list—so you can start building those connections before you need them to pay off.
How to get $10 million when you sell
The higher your EBITDA, the higher the valuation multiple—as participants heard from Punctuation’s Jonathan Baker during my Control (and Maximize) Your Agency Exit workshop. He notes multiple ranges of 2.5X to 4X for $250K to $1 million in EBITDA, versus 8-11X for $5-10 million in EBITDA. These are multi-year weighted averages—not just the current year.
With that “multiple of EBITDA” valuation approach in mind, any of these weighted-average combinations could produce a $10 million price:
- $5 million in revenue with 30% net profit margin, valued at a generous 6.7X multiple
- $6 million in revenue with 28% net profit margin, at a high 6X multiple
- $10 million in revenue with 20% net profit margin, at a moderate 5X multiple
- $20 million in revenue with 13% net, at a relatively low 4X multiple
If you net $10 million from selling your agency, a 4% withdrawal rate would produce $400K a year in income. In contrast, $1 million would produce just $40K a year under that assumption. And don’t forget taxes and fees, too.
You might get more… or less
Keep in mind that buyers will often want you to accept an “earnout” where you receive a portion of the valuation in future performance-based installments. You might never see the earnout payments… or you might get even more.
If you look on business broker sites like BizBuySell.com and BusinessBroker.net, you’ll see smaller agencies are frequently listed at a 3X+ multiple. If your annual net profits are trending to $500,000, a 3X multiple means a valuation of $1.5 million. Getting your annual net profits to $700,000, that same 3X turns into a valuation of $2.1 million… or a 4X multiple makes it $2.8 million. For many agencies, getting to $1+ million in EBITDA is a sweet spot—as long as they can sustain it.
Of course, having the right financials is no guarantee that someone will pay that amount. For instance, the acquirer typically wants you to be optional—both operationally and for business development. If you need to extricate yourself from day-to-day operations, my book Work Less, Earn More can help.
Broker fees but keeping the cash
If you use a business broker to sell your agency—which you probably should, unless a qualified buyer approaches you out of the blue with a reasonable offer—you’ll also pay the broker a “success fee” (commission). This is often in the neighborhood of 10%, although a broker might charge based on the cash you receive at closing. Like paying a real estate agent when you sell your house, this commission reduces your net proceeds from the sale.
The owner typically keeps most of the cash from the business’ bank account—apart what you negotiate around Working Capital—so if you have lots of cash in the business, most of that will come with you. That is, the acquirer assumes you pay off any business debt and then keep excess cash, separate from the valuation.
Getting a formal agency valuation
These are rough figures. Want a better idea of what you’d sell for? I recommend hiring a valuation expert who specializes in agencies. You could hire any financial consultant to do the valuation, but it’s smarter to hire a specialist who knows our industry.
- Punctuation (David C. Baker & Jonathan Baker) offers a valuation service specific to agencies ($5,000). They offer other agency M&A services, including taking your firm to market.
- TobinLeff offers a Market Value Analysis, which includes a valuation ($3,500 to $7,000). Their broader services include sell-side M&A advice. (Disclosure: We have a referral agreement.)
Clients have also also worked with TORRO Group (I have a referral agreement). And I’m familiar JEGI Clarity and Spring Advisors, both of whom focus on larger agencies.
Increasing your valuation
You may find your current valuation is lower than you want. If so, I’m glad to help you create a plan to increase the number—please get in touch. If you prefer a DIY approach, get my on-demand training: Control (and Maximize) Your Agency Exit.
Question: What will you need to change now to get $10 million (or more) in the future?
