Herringbone Digital Blog

If I could give agency owners just one metric to obsess over, it wouldn’t be revenue, it wouldn’t be headcount, and it wouldn’t even be profit.

It would be client retention.

Here’s why:

• High retention = recurring revenue. If your clients stay year after year, your revenue base becomes predictable.
  
• Recurring revenue = predictable cashflow. Predictability reduces risk for buyers.
  
• Predictable cashflow = higher multiples. Less risk means buyers are willing to pay more.
  

I’ve seen it play out in real deals. Two agencies with the same $5M in revenue can command completely different valuations. One with 60% annual retention might get a 3× multiple. Another with 90% retention can push toward 6× or higher — even if their margins are identical.

Retention tells a story. It says your clients value your services. It says your team knows how to keep relationships strong. And it says the agency isn’t constantly running on a hamster wheel of new client acquisition just to stay in place.

Of course, improving retention isn’t always easy. It requires:

• Building sticky service offerings (not easily replaced or commoditized).
  
• Investing in client success and account management.
  
• Tracking client satisfaction, not just deliverables.
  
• Proactively solving problems before clients churn.
  

Retention is the “quiet” multiplier because it doesn’t always get the attention it deserves. Founders often chase new logos, but it’s the existing logos that really drive value when it comes time to sell.

So here’s my advice: if you want to increase your eventual exit valuation, don’t just focus on new business development. Look at your current book of clients and ask: What would it take to keep them for the next 5 years?

Contact us if you’re and agency owner and have considered selling or joining something bigger.

Let’s be honest — most agency owners don’t start their business because they love bookkeeping. Numbers feel like a back-office chore, something you review once a year at tax time.

But here’s the truth: to a buyer, your financials are the foundation of the business. 

When a buyer looks at your numbers, they aren’t just trying to calculate revenue or profit. They’re asking:

• Can I rely on this?
  
• Is this a business I can confidently invest millions of dollars into?
  
• Or are there hidden risks lurking beneath the surface?
  

Here’s the difference clean financials make:

• Speed: Organized books speed up due diligence, reducing months of painful back-and-forth.
  
• Credibility: Well-prepared financials signal professionalism and reduce the likelihood of price cuts.
  
• Trust: Buyers see you as a lower-risk seller, which makes them more comfortable offering stronger terms.
  

I’ve seen deals completely collapse because numbers couldn’t be tied out. On the flip side, I’ve seen sellers fly through diligence in record time because every invoice, contract, and P&L tied perfectly. 

This level of transparency is especially important if you are claiming EBITDA add-backs (pro-tip: add-backs listed out in an obviously hastily prepared google sheet is going to raise more questions than it answers. The more credible the underlying data is to support an add-back, the more likely that a buyer will accept it). 

And here’s a little secret: buyers value clarity almost as much as they value performance. If you can clearly show where your revenue comes from, how margins are structured, and how expenses flow, it tells a buyer you truly understand your business. That alone makes you more attractive.

So if you’re even thinking about selling in the next few years, start here:

• Clean up your books.
  
• Move beyond tax-only accounting to management-level reporting.
  
• Work with a CPA or advisor who knows how to prepare financials for an acquisition.
  

Remember: sloppy books don’t just slow things down. They cost you money.

Contact us if you’re and agency owner and have considered selling or joining something bigger.

One of the first questions agency owners ask me is: “How do I know if I’m ready to sell?”

It’s a fair question — but the answer isn’t always as simple as revenue or profit. Readiness is about much more than the numbers.
Here are some of the key questions I encourage owners to ask themselves:

Do you have clean, accurate financials? Buyers will want to see at least 3 years of P&Ls, balance sheets, and tax returns. If your books aren’t buttoned up, it’s an immediate red flag.

Does your agency run without you? If the business collapses the moment you step back, that’s a big problem. Buyers want to know they’re buying an agency, not just buying you.

Are your revenues stable (or better, growing)? Even modest growth builds confidence. Flat or declining revenues can still sell, but often at a discount.

Do you have clear answers for “what’s next?” Do you want to walk away, stay and scale, or roll equity? A buyer will ask — and you should know before the process begins
.
What’s your number?  Do you have a number at which you would want to transact at? And do you know whether that number is reasonable or not? Buyers can get turned off by sellers who don’t really know what their agency is worth.

If you can answer “yes” to most of these, you’re closer to being “sale-ready” than you think.

Some owners start preparing 2–3 years in advance: cleaning up their books, tightening client contracts, building a stronger leadership team, even just documenting processes that only live in their head. All of these steps make the eventual deal smoother, faster, and more valuable.

So my advice is simple: don’t wait until you’re ready to sell to start preparing. The earlier you act, the more control you’ll have when opportunity knocks.

👉 If a buyer called you tomorrow with real interest, would you be excited to listen — or scrambling to get your house in order?

Contact us if you’re and agency owner and have considered selling or joining something bigger.

In the previous post, we talked about some of the items that can lead to higher (or lower) multiples. In this post, I wanted to dive a little deeper into 3 that really matter. .

I call it the Triangle of Value.

1. Retention – are your clients sticking around? High churn kills value. Delivering results, sticky services, and satisfied customers create recurring revenue. What’s good? Good agencies will have ~75% gross revenue retention. This means, for any given cohort of customers, at least 75% of them are still around 1 year later.
   
2. Growth – is your revenue moving up and to the right? Flat revenue is definitely a worrying sign for a buyer. Aim for growth around 15-20%, but make sure that it’s good quality growth that does not negatively impact retention.
   
3. Profitability – are you generating sustainable margins? Buyers don’t just want growth, they want efficient growth. For agencies that have predominantly US-based employees, strive for margins of 20-25%; if your agency outsources work to a low-labor cost country, those margins could push into the 30%-ish range.
   

Why does this triangle matter? Because together, these three create predictable cashflow. And predictable cashflow is the holy grail in M&A.

I’ve seen agencies with $10M in revenue but shaky retention get discounted heavily. I’ve also seen $5M agencies with strong retention and profitability get bought for premium multiples.

The takeaway: you can’t ignore any corner of the triangle. Growth without profitability isn’t sustainable. Retention without growth gets stale. Profitability without retention is fragile.

Contact us if you’re and agency owner and have considered selling or joining something bigger.

Ever wonder why one agency sells for 2× EBITDA while another gets 8×?

Here’s why: buyers don’t just look at your revenue. They look at the quality of that revenue.

Factors that influence valuation include:

• Profitability – healthy margins matter more than top-line revenue.
  
• Retention – do clients stay year after year, or churn quickly?
  
• Growth – is your revenue trending upward consistently?
  
• Niche – are you specialized in a valuable segment, or a generalist?
  
• Team & Systems – can the business run without you?
  

I’ve seen two agencies, both doing $5M in revenue, sell for wildly different prices. One had sticky clients, strong margins, and a leadership team. The other had flat growth, founder dependency, and shaky books. The result? A 3× multiple vs. a 7× multiple.

Valuation is math, but it’s also storytelling. The story you can tell about your revenue, your clients, and your future potential matters just as much as the spreadsheets.

👉 Which of these factors do you think your agency is strongest in?

Contact us if you’re and agency owner and have considered selling or joining something bigger.

Not all buyers are created equal — and knowing who’s across the table matters as much as the price they’re offering.

Here are the big categories:

• Strategic Buyers – another agency, platform, or marketing services firm. They want synergies: your niche, your clients, your geography.
  
• Private Equity Buyers – financial investors who back roll-ups or platforms. They care about returns, but also about building value over a 3–7 year period.
  
• Individual Buyers / Search Funds – entrepreneurs looking to buy themselves a business instead of starting one.
  

Each has different goals:

• A strategic buyer might want to integrate your team and brand.
  
• A PE buyer may want you to stay on and help grow a platform.
  
• An individual might want you to stick around short-term to show them the ropes.
  

The same agency could get very different offers depending on the buyer type. Which means you need to think beyond “the multiple” and ask: What do I want my agency’s future to look like after the sale?

Contact us if you’re and agency owner and have considered selling or joining something bigger.

Selling your agency isn’t one conversation — it’s a journey.

A typical deal flows like this:

#️⃣ Initial Outreach – a buyer expresses interest (or you decide to explore options).

#️⃣ Intro Conversations – light discussions about fit, strategy, and goals.

#️⃣ Letter of Intent (LOI) – a non-binding document that outlines headline terms.

#️⃣ Due Diligence – the buyer digs deep into your financials, operations, customers, and team.

#️⃣ Final Agreement & Closing – lawyers paper the deal, both parties sign, and money changes hands.

Each stage has its own rhythm and pressure points. Intro calls feel exciting. The LOI feels like a milestone, but it’s just the start. Diligence can feel invasive, like an audit crossed with a marathon. And closing can drag on with negotiations over details you never thought mattered (like working capital adjustments).

Owners who know the roadmap go in prepared. They’re less likely to be blindsided, and more likely to keep control of the process.

👉 If a buyer approached you tomorrow, would you know what happens after that first call?

📧 If you’re an agency owner, have you ever considered selling or joining something bigger? Contact me if you’d like to learn more about what an acquisition could mean for you, your employees and your clients. 📧

Most agency owners hear “M&A” and think:

👉 Complicated Wall Street stuff

👉 Billion-dollar deals splashed in the headlines

👉 Not relevant to a 20-person shop in Austin or Denver

Here’s the reality: M&A simply means a transfer of ownership. That could be one founder buying out another, a strategic buyer rolling you into their platform, or a private equity firm backing your next stage of growth.

For agency owners, M&A is about creating options:

💠 Cashing out after years of hard work.

💠 Bringing in a financial partner to scale faster than you could alone.

💠 Merging with another firm to expand capabilities and win bigger clients.

In other words, M&A isn’t just for the big guys. The middle market — agencies doing $2M–$20M in revenue — is where most of the action happens.

The key is knowing that you don’t have to wait until you’re ready to sell to learn about M&A. In fact, the earlier you understand the mechanics, the stronger your position when that buyer email inevitably lands in your inbox.

Curious about how M&A could apply to your agency? Start a conversation by contacting us at https://www.herringbonedigital.com/contact.html

How did private equity find me?”

That’s one of the most common questions I get from agency owners.

Here’s the process I use (and I suspect most other buyers aren’t too different):


Step 1: Define the ideal candidate

Here, we set the criteria for agencies that we want to acquire – industry focus, products offered, size, and overall fit.


Step 2: Build the master list

Using various research tools, we create a list of every agency that checks those boxes.


Step 3: Narrow it down

Deep “desktop research” using Google, LinkedIn, customer reviews, referrals and other public and private datasets. We dig into founders, culture, track record, and reputation. This is the most time-consuming step—but also the most important because it helps us make sure that we are reaching out only to the agencies that we believe could be good fits.


Step 4: Outreach

Once we’re confident there’s alignment, we reach out directly to the founders and executive teams to start a conversation.


👉 From the outside, that call or email might look like a generic blast. But in reality, a huge amount of effort has gone into identifying you as a strong fit before we ever hit send.

The “Triangle of Value” — The 3 Metrics Buyers Care About Most

When I talk to agency owners about M&A, I share a simple framework I call The Triangle of Value.

It’s built on 3 metrics every serious buyer obsesses over:
1️⃣ Retention – High retention = recurring, predictable cashflow.
2️⃣ Growth – More growth = more cashflow, especially at scale.
3️⃣ Profitability – Obvious, but worth saying: profitability drives cashflow.

The question I get most often is: “Which one matters most?”

Answer: All of them.

Why? Because most buyers (especially PE-backed) are really buying reliable, predictable, recurring cashflow — and each side of the triangle feeds it.

📊 Here’s the key:
You don’t need all three to be perfect all the time. You do need to measure, manage, and be able to explain your numbers.

– Investing in growth and taking a short-term hit to profitability? Fine — if you can show the impact.

– Pulling back on growth to shore up retention? Also fine — if you have the data to prove it worked.

Yes, buyers look at many other things.

But if you control these three metrics, you’re already a long way toward maximizing your valuation.