Oct 1, 2019
What is your digital agency worth today? What could you sell your agency for? Honestly, it's worth whatever someone is willing to pay for it. And a lot of it depends on where you're at within your agency. Allow me to explain...
A while ago I put out an agency valuation formula, but the information is changing and I wanted to provide you with a resource if selling - merger or acquisition - is something you're considering. A lot of people think they can sell their agency for at least the amount of revenue they're bringing in, plus maybe media spend on top of that... Not necessarily true!
If you want to create freedom by eventually selling your digital
agency, this is the video for you.
If you're under $1 Million in net profit and $200,000 in EBITDA then usually its 1-2X.... $400,000 max in valuation. Will you get 100% of that in cash? Nope - more like 20-40% in upfront cash with the rest tied to a performance-based model by the agency hitting certain benchmarks. I know that's soul-crushing, right? But consider -- why you are selling? Is it because you're too stressed out? Is it because you don't have the right systems in place in order to just do what you love? Maybe selling isn't the answer but instead, you need to take a closer look at the business to see where the gaps are and fix those, then increase your valuation before selling. Because look at these numbers if you improve EBITDA...
If you can get to at or over $1 Million in EBITDA it's a whole new ballgame. Recently, one of our clients was at $1+ Million in EBITDA net profit and sold for an 8X multiple. That's uncommon, but a 5X multiple at that level is realistic. At that level, you can expect about 80% in cash upfront.
And if you are over $3 Million EBITDA expect an 8X multiple. When you're up over $5-7 Million.... well, those numbers are just sick!
The market right now is paying out at these numbers. So, if you want to eventually sell your digital agency then you need to understand how to get the most for it. I want you to understand what you need to do in order to demand top dollar.
Thanks for watching. I hope you keep up with the daily videos I post on my channel. Make sure you subscribe and share your learnings with others. Your comments are why I do this, so please take a second and say hello.
JASON SWENK IS AN AGENCY ADVISOR THAT GUIDES MARKETING AGENCIES THROUGH A PROVEN FRAMEWORK FOR GROWING THEIR AGENCY FASTER & EASIER.
Fresh out of college Jason was off to work for Arthur Anderson,
one of the big 5 consulting firms. He quickly realized that he
could never work for anyone other than himself. He decided to
change direction, launch a digital agency that quickly grew to a
multi-million dollar operation working with brands such as
AT&T, Hitachi and Lotus Cars. After 12 years of steady growth,
the agency caught the attention of bigger agencies and Jason sold
it in 2012.
Now, Jason leads http://JasonSwenk.com, a unique media company & consultancy helping marketing agencies grow & scale their agencies faster by applying the framework that he used to grow, scale and eventually sell his agency. Jason has helped over 10,000 agencies in 23 countries meet or exceed their business goals.
Jason currently hosts two shows that are available for download…
The Smart Agency Master Class Podcast, dedicated to providing tactics and strategies to agency owners and decision-makers that cut through the BS, focus on exactly what works and what doesn’t; and
SwenkToday a weekly VLOG that documents the entrepreneur journey of building another multimillion-dollar business, where he shares the latest strategies and answers the most burning questions entrepreneurs have.
TUES VLOG #SwenkToday
Q&A from my digital agency audience
Ask me A Question
(Digital Agency Interviews)
Follow me here:
Music by epidemicsound.com