Mailbag: How can I sell my digital agency for a million dollars?

Mailbag: How can I sell my digital agency for a million dollars?
Written by: Karl Sakas
Sell your agency for $1 million

Here are the numbers it would take to sell your agency for a million dollars.

A client recently shared: “I want to sell my agency for $1 million in 8 years so I can retire.” He wanted to know if he was on track to get that exit price.

Other current and prospect clients have mentioned a $1 million target—and several want a lot more than that.

If you’re focused on running an Equity agency, let’s look at what it would take to get $1 million. It might be closer—or further—than you think.

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 unexpected offer to sell.

What drives the offer amount?

When someone buys your 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.

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, and how you’re paying yourself.

What’s a normal EBITDA multiple for selling an agency?

It’s all negotiable—but a 3-7X multiple is typical for agencies.

That’s via TobinLeff, the exit planning firm for agencies. The multiple assumes a 3-year 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 a million dollars when you sell

With that “multiple of EBITDA” valuation approach in mind, any of these combinations could produce a million-dollar sale price for your agency:

  • $1 million in revenue with 20% net profit margin, valued at a 5X multiple
  • $1 million in revenue with 33% net profit margin, at 3X multiple
  • $2 million in revenue with 25% net profit margin, at 2X multiple
  • $5 million in revenue with 20% net profit margin, at 2X multiple
  • $10 million in revenue with 10% net profit margin, at 1X multiple

If you look on business broker sites like and, you’ll see agencies are frequently listed at a 3X multiple. If your annual net profits are $150,000, a 3X multiple means you’d sell for $450,000. Getting your annual net profits to $200,000 means you’d sell for $600,000—an extra $150K.

Of course, having the right financials is no guarantee that someone will pay that amount.

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), typically around 10%. 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 from a couple months of operating expenses—so if you have lots of cash, that’ll likely come with you.

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 the agency industry. (As I note in my company Values, I don’t receive any referral fees for recommending David or the Tobin Group.)

You’ll probably find the 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.

Question: What will you need to change now to get a million dollars in the future?

Your agency’s challenges are unique. But you don’t need to solve them the hard way.

As a leader, you can see your ideal destination—the agency you want to lead. But how do you know which decisions will help you get there?

With Custom Consulting, we’ll help you reach your goals faster, more smoothly, and more profitably than you would on your own.

As an agency consultant, I bring an outsider perspective and insider knowledge, to start streamlining your decision-making process. Interested?