Herringbone Digital Blog

When people talk about selling their agency, the conversation almost always starts with numbers — valuation, multiples, EBITDA, earnouts.

But here’s something I’ve learned after years of M&A work: the success or failure of most acquisitions isn’t determined by the financials. It’s determined by cultural fit.

You can negotiate deal terms. You can structure earnouts. You can model synergies.

But you can’t negotiate culture.

What “cultural fit” really means in M&A
Cultural fit is the alignment of values, decision-making styles, communication, and priorities between buyer and seller.

In practical terms, it shows up in questions like:

– How are employees treated and developed?

– Who makes the decisions and how fast are they made?

– What does leadership look like day to day?

If those things don’t align, friction shows up immediately — and it spreads fast.

What happens when it’s missing, I’ve seen great agencies lose their soul after being acquired by the wrong partner.

❌ Founders become frustrated because the new owners impose rigid systems.
❌ Employees feel lost as their culture of creativity turns into one of reporting and control.
❌ Clients sense the shift, and relationships start to erode.
Financially, those deals look fine on paper. Operationally, they struggle.

What happens when it’s right. When cultures align, it’s magic.

✔️ The buyer brings resources, process, and stability.
✔️ The seller brings energy, relationships, and deep client understanding.
✔️ Together, they scale faster than either side could alone.
✔️ The founder feels proud watching their team thrive with new opportunities.
✔️ The buyer gets what they paid for — and more.

How to test for cultural fit
– Spend real time with the buyer before signing the LOI.
– Ask about their post-acquisition track record — how do they integrate other teams?
-Talk to other founders who’ve sold to them.
-Observe how they treat people who aren’t in the negotiation room.

Trust your gut. Culture doesn’t show up in a spreadsheet, but you’ll feel it in every conversation.

When you sell your agency, you’re not just selling assets — you’re handing over your legacy, your team, and your reputation.

So don’t chase only the highest price.

Chase the right partner.

Because when the culture fits, everything else falls into place.

Let’s talk about one of the most misunderstood (and emotionally charged) parts of any deal: negotiation.

Most agency owners approach a negotiation thinking it’s all about one number — the price.
But that’s exactly where most sellers go wrong.

In reality, the purchase price is just one part of the deal. The structure — how that price is paid, under what terms, and with what obligations — often matters far more.

Here are a few common traps I see sellers fall into again and again:

1️⃣ Focusing only on the headline number.

A $10M offer sounds better than $8M… until you realize $4M of it is an earnout tied to performance metrics you don’t control.
Always ask: What’s guaranteed vs. what’s contingent?
A lower price with cleaner terms often beats a higher price full of conditions.

2️⃣ Assuming the first LOI is final.

The LOI (Letter of Intent) feels like a finish line — but it’s actually the starting line.
Everything that follows — due diligence, final agreements, working capital adjustments — can change the economics of the deal.
Smart sellers keep some flexibility and don’t emotionally “bank” the LOI number too early.

3️⃣ Ignoring working capital.

This one surprises a lot of founders.
Buyers expect a certain amount of working capital (cash, AR, prepaid expenses) to remain in the business at closing. If you haven’t planned for that, it can reduce your actual cash proceeds by hundreds of thousands.
Don’t find that out the week before closing.

4️⃣ Negotiating emotionally.

Selling your agency is personal — you built it. But emotion clouds judgment.
I’ve seen founders walk away from great offers because they felt “disrespected,” and others accept poor deals because they just wanted it over with.
Take a breath, get advice, and remember: this is a business transaction.

5️⃣ Not understanding post-closing obligations.

Non-competes, transition periods, consulting agreements — these can all shape what your life looks like after closing.
Don’t just focus on the check. Think about what you’ll actually be doing 3, 6, 12 months later.

Here’s my advice: don’t negotiate to win — negotiate to align.
Because when alignment is strong, both sides walk away happy, and the business you built continues to thrive.

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

Few words in M&A trigger as much emotion as “earnout.”

If you’ve ever talked to someone who sold their agency, chances are you’ve heard horror stories:

“We never got our earnout.”
“They changed the rules after closing.”
“It was just a way to shortchange us.”

And I get it. I’ve been on both sides of earnouts — as a seller and as a buyer — and I can tell you this: earnouts can be frustrating when structured poorly, but powerful when done right.

So what exactly is an earnout?
An earnout is a portion of the purchase price that’s paid later, based on the performance of the business after the sale. It’s typically tied to metrics like revenue, EBITDA, or client retention.

Here’s why earnouts exist:

• To bridge valuation gaps. Maybe you think your agency is worth $10M, but the buyer thinks it’s worth $8M. An earnout can close that gap if the business performs as you expect.
  
• To align incentives. The buyer wants to ensure you stay motivated after the sale. The seller gets upside if the company continues to grow.
  
• To manage risk. Buyers want to make sure that key clients or staff don’t vanish post-close. Earnouts reduce their downside if things change.
  

Now, the bad reputation comes from poor design — vague metrics, unfair control, or lack of transparency. If you’re staying on post-sale but the buyer controls the levers that determine your payout, you’ve just given them the ability to “move the goalposts.”

The key is to structure earnouts clearly and fairly:
✅ Define metrics precisely (e.g., “Revenue from existing clients” vs. “total revenue”).
✅ Agree on what’s in your control.
✅ Set timelines that are realistic (usually 1–3 years).
✅ Align reporting and visibility so you can track performance.

When structured this way, earnouts can actually be a win-win. I’ve seen sellers double their initial payout because the business exceeded expectations. In those cases, the earnout wasn’t a burden — it was a reward.

From a buyer’s perspective (mine included), nothing makes me happier than paying an earnout. It means the acquisition worked. It means the founder stayed engaged, clients were retained, and the company grew. That’s a win for everyone.

So before you write off earnouts as “bad,” understand what they really are: a tool. Like any tool, it depends on how it’s used.

👉 If you sold your agency tomorrow and had to choose — would you prefer all cash up front, or a lower upfront price with a chance to earn more later?

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

When most agency owners hear the words “due diligence,” their first thought is: “Oh no — this is where the fun ends.”

And to be fair, diligence can be intense. It’s the part of the process where the buyer starts verifying everything you’ve told them — from your financials to your operations, contracts, people, and even culture.

But here’s what many owners don’t realize: due diligence isn’t meant to “catch you out.” It’s meant to confirm confidence. Buyers are about to write a big check, and they want to make sure the story matches the data.

Here’s what a typical diligence process involves:

Financial Review: Buyers dig into your P&Ls, balance sheets, tax returns, AR/AP aging, and customer-level revenue. They’re checking for accuracy, consistency, and hidden risks.

Customer & Revenue Analysis: They’ll look at churn, client concentration (does one client make up 30% of revenue?), contract lengths, and recurring vs. project-based work.

Operational Review: How does your delivery process work? What tools do you use? How efficient is your team?

HR & Payroll: Who are your key employees? Are there employment agreements in place? What’s your compensation structure?

Legal: Corporate filings, intellectual property ownership, insurance, contracts, potential disputes — all get reviewed.

Sound overwhelming? It can be — especially if you’re unprepared. But the sellers who do best in diligence are the ones who start preparing months (or years) before they ever talk to a buyer.

They keep clean, up-to-date financials. They store contracts in one place. They can quickly show customer lists, renewal dates, and retention metrics. In short: they run their business as if a buyer could ask to see it tomorrow.

Here’s what that does:
– It keeps the process efficient (less time answering requests).
– It signals professionalism and transparency.
– And it keeps momentum — which is critical, because long diligence processes kill deals.

I’ve seen deals drag on so long that enthusiasm fades on both sides. I’ve also seen deals close in 45 days because the seller was buttoned up and responsive.

So if you’re an agency owner thinking about selling in the next few years, start treating your business like it’s already in diligence. You’ll be amazed how much smoother — and more profitable — your future exit becomes.

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

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.