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.