A marketing, creative or digital agency is worth what its ongoing profit can support, after a fair wage for the founders, adjusted for risk. Retained clients on written agreements, revenue spread across many clients and a team that holds the relationships tend to support value. One dominant client or a founder who wins every pitch tends to reduce it.
What is the short answer?
Your agency is worth what its ongoing profit can support, adjusted for the risk that profit will not continue. For an agency, the biggest risk is that clients, talent or know-how walk out the door.
An agency owns few hard assets. Its value sits in client relationships, the team and the way work gets done. A buyer pays for the part of that which will stay after you step back.
Three things matter most:
- Profit after a fair founder wage: what is left once the founders are paid what it would cost to replace them.
- Reliability of income: retainers and repeat work, spread across many clients.
- Who holds the relationships: the team and systems, or you personally.
What pushes the value of an agency up or down?
Income that will keep coming without you tends to push value up. Income that depends on one client, one person or the next pitch tends to push it down.
| Factor | Tends to support value | Tends to reduce value |
|---|---|---|
| Income type | Retainers on written agreements | Mostly one-off projects and pitches |
| Client spread | Many clients, none dominant | One or two clients make up much of profit |
| Client tenure | Long relationships that have renewed | New clients, or frequent churn |
| Founder role | Team leads accounts and delivery | Founder wins, runs and delivers the work |
| Key staff | Several senior people, with sound terms | One creative or strategist holds everything |
| Margin | Clear pricing, tracked hours, healthy margin | Scope creep, write-offs, unbilled time |
| Platform reliance | Work spread across channels and tools | Income tied to one platform's rules or partner status |
Retainers. A retainer is an ongoing monthly arrangement for set work. It makes income easier to predict than projects. Notice periods and whether the agreement can be assigned to a buyer matter too.
Founder dependence. In many agencies, the founder is the main reason clients stay. A valuer treats that as a risk, unless the evidence shows the team holds those relationships.
Pass-through costs. Media spend, printing and freelancer costs billed at cost can inflate sales. Valuers focus on the gross margin your agency keeps.
Which add-backs and traps matter in an agency?
Add-backs are costs added back to profit because a new owner would not pay them. Agencies have a few traps that can make profit look higher or lower than it is.
- Founder pay. If you pay yourself little and take dividends, profit looks high. A valuer replaces your pay with a market wage for the role you fill.
- Contractors. Regular freelancers may be doing core work. If a buyer would need to hire, the extra cost is counted.
- Work in progress. Unbilled work and fees billed in advance need checking. Fees billed upfront for work not yet done are owed to the client in work.
- Lost clients. A large client that has already given notice is not ongoing income, even if it is in last year's figures.
- One-off wins. An unusually large campaign or award year may not repeat.
- Software and subscriptions. Tools paid privately, or through the business for private use, are adjusted either way.
- Key staff terms. Restraint and confidentiality terms, and how ownership of creative work is handled in contracts, affect what a buyer is really getting. Your lawyer can review them.
What documents matter for valuing an agency?
Beyond two or three years of financial statements and tax returns, a valuer needs the records that show where income comes from and how secure it is.
- Revenue by client for each year, with retainer and project work split out.
- Current client agreements, retainer terms and notice periods.
- A client list showing when each relationship started.
- Timesheets or job reports showing hours, write-offs and margins.
- Staff and contractor lists with roles, pay and employment terms.
- Any pipeline report of proposals sent and work confirmed.
- Platform partner or reseller agreements, if income depends on them.
The Australian Government's guide to valuing your business lists customer loyalty, customer lists, staff performance and business procedures as parts of goodwill. In an agency, those are much of what a buyer is paying for.
How can two similar agencies be worth different amounts?
This example is made up. It shows how similar profit can lead to different values.
Agency A and Agency B report similar profit. Agency A earns most of its income from many clients on retainers. Account managers run day-to-day contact, and the founder takes a fair salary.
Agency B earns mostly from projects. One client provides a large share of its work. The founder pitches, leads every account and pays themselves very little.
Once Agency B's founder is paid a market wage, its real profit is lower. Its income is also less certain. Agency A is likely worth more.
Which Valuo report fits my agency?
Choose by who will read the report. For your own planning, the Business Value Report fits. If a buyer, lender, investor or partner will rely on it, choose the Professional Valuation Report.
Business Value Report. A streamlined assessment for your own decisions, such as planning a sale in a few years. A valuer reviews it before it is issued. It is not signed and is not for buyers, lenders or other third parties. Fees start from $995 + GST.
Professional Valuation Report. A full independent valuation, with adjustments explained and a report signed by the valuer responsible. It suits a sale, a merger with another agency, a lender or bringing in a partner. Fees start from $1,495 + GST. For revenue of $1 million to under $2 million, it is $1,995 + GST.
Every fee is fixed by revenue and confirmed in writing before you pay. Businesses with revenue of $10 million or more receive a fixed fee quoted before any work starts.
If you are buying out a partner or restructuring the business, Oliver Group scopes that work. For tax questions, speak with your accountant.
Get your figure
- See your fee in two taps: Get your fixed fee.
- Compare both reports and every revenue band: pricing.
- The general guide: how much is my business worth.
- Planning your exit: business valuation for retirement and succession.
Questions
Is my agency worth a share of its annual fees?
Not on its own. Fees show the size of the agency, not what it keeps. Value comes from the profit after paying the team and a fair wage for the founders, and from how reliable that profit is.
Do retainer clients make my agency worth more?
Often, yes. Retainers on written agreements make future income easier to predict. A valuer looks at how long clients have stayed, how much notice they must give and whether the terms can be passed to a new owner.
What happens to value if my biggest client leaves?
If one client makes up a large part of profit, losing them could change the business a lot. Buyers and valuers allow for that risk, so a wider spread of clients tends to support value.
Does my agency's value depend on me staying after a sale?
It can. If clients deal only with you, a buyer may want you to stay for a handover period, or may pay part of the price later based on results. Building a team that holds client relationships reduces that risk.
Are pass-through media and production costs part of my revenue?
They may appear in your sales, but they are usually passed straight to the client. A valuer looks at the margin you keep after those costs, because that is what pays the team and the owners.
General educational information, not advice. Examples are hypothetical and do not value a real business. The right treatment depends on the purpose, the evidence and the agreed scope.