A confession to start with. For thirteen years of running my agency, we had £0 of monthly recurring revenue.
Zero. Every month, on the first, we started the counter at zero and ran as hard as we could to bring revenue in by the last day. Some months we hit £120K. Some months we hit £40K. We never knew which one was coming.
The stupid thing is, I treated this as a fact of life. “Project business,” I told myself. “That’s how agencies work.” What a load of rubbish.
Today, seventy-eight percent of the agency owners I advise are building their businesses with MRR at the centre. The ones who do it well are trading at 50-100% higher valuation multiples than the ones who don’t. If you want to understand how buyers actually value agencies, start with the EBITDA multiples guide and the valuation maths. If you want to understand why the multiple moves, start here.
What MRR actually is (and what it isn’t)
MRR stands for Monthly Recurring Revenue. Plain definition: revenue that comes in every month, predictably, without having to sell new projects to generate it.
Here’s the common mistake. Agency founders call their retainers “recurring revenue” and assume that counts. Sometimes it does. Often it doesn’t.
For revenue to count as real MRR in a buyer’s eyes, three things need to be true:
- A written contract specifying the monthly fee, the scope, and the duration
- A duration of at least twelve months or auto-renewing terms that require active cancellation
- A lock-in mechanism: cancellation fees, annual commitments, usage dependencies, or integration deep enough that switching is painful
If your “retainers” are month-to-month with thirty days’ notice and no contract, buyers will heavily discount that revenue during diligence. It’s project revenue wearing a retainer coat. On a £2M agency with 40% “recurring” that’s actually month-to-month, buyers might credit you for only 15-20% real MRR. That gap is the multiple gap.
Why MRR matters so much for valuation
Three reasons, stacked.
One: predictability. Buyers pay a premium for revenue they can forecast. Project revenue is volatile. MRR is flat. A business with £100K of MRR has £1.2M of annualised revenue that a buyer can count on without doing anything. That’s worth more than £1.2M of project revenue, because the project revenue might not come back next year.
Two: stickiness. Clients on real MRR contracts churn less. Switching costs matter. A buyer inherits less churn risk.
Three: scalability. MRR can grow without proportional sales effort. Each month’s revenue is the previous month’s revenue plus any new signings minus any churn. Project revenue requires you to rebuild the pipeline every quarter.
Stack all three together and MRR-heavy agencies trade at 5x-6x EBITDA where project-heavy agencies trade at 3x-4x. On a £400K EBITDA business, that’s £400K to £800K of additional enterprise value, purely from revenue model.
The three-layer MRR model
When I work with agency owners on building MRR, three layers usually come up. Stack them and you go from zero recurring to 50%+ recurring in twelve to twenty-four months.
Layer 1: Service retainers (the foundation)
A service retainer is a written contract for a defined scope of ongoing work, delivered monthly, at a fixed monthly fee.
Examples: SEO retainer at £4,000/month for specific deliverables, paid ads management at £3,000/month plus ad spend, content production at £5,000/month for defined outputs, creative support at £6,000/month with a day-rate overflow model.
The key is defined scope with contract lock-in. Not “£4,000 a month for whatever you need.” That’s a month-to-month friendship, not a retainer. A real retainer spells out exactly what the client gets and exactly what they pay for.
Layer 1 alone can get an agency from 0% to 20-30% MRR over 12 months with deliberate effort.
Layer 2: Productised service tiers
Layer 2 is where you turn your core services into packaged offerings with clear tiers. Not custom scoping. Pre-defined packages, pre-defined deliverables, pre-defined pricing.
A common structure is three tiers: Essentials, Growth, Enterprise. Each tier has a specific monthly fee, specific deliverables, specific turnaround commitments. Clients choose a tier. You deliver the tier.
Productised tiers do two things for MRR. First, they make the sale faster (no custom proposals). Second, any trained team member can deliver the lower tiers, not just you. That second point is what allows growth beyond founder capacity.
For the full framework on productisation, see the productised services article (coming shortly in this cluster) and the agency pricing models guide.
Layer 3: Software, licensing, or tooling add-ons
Layer 3 is the highest-margin tier. You layer software, tools, or licensed IP on top of the service layers.
Examples: a proprietary dashboard clients pay £200/month to access, a reporting tool at £150/month bundled into the mid-tier retainer, a training programme or certification at £500/month for client teams, licensed frameworks or templates.
Layer 3 is the hardest to build but the highest-margin. Software revenue trades at 6x-10x+ multiples (it’s not a pure services business at that point). Even small software components attached to an agency service can pull the whole multiple up.
Layer 3 is rare in the agency world. That’s fine. Layer 1 and Layer 2 alone can move your MRR from 0% to 50% and move your multiple from 3x to 5x.
The Trojan Horse Retainer: how to land a first retainer
The single most effective technique I’ve seen for agencies that have zero MRR and want to build their first layer is what I call the Trojan Horse Retainer.
The problem: big pitches to new clients (brand, website, strategy) often get blocked by the internal marketing manager. They’re the gatekeeper. They like your work but don’t want to hand over their job.
The fix: go above them. Approach the MD or owner directly. Offer a small, low-friction social media or ongoing support retainer at £2,000-£3,000 a month. Price it to be a quick yes. Deliver well. Build trust inside the business over three to six months. Then the bigger brand or website project reveals itself, and it comes to you because you’re already inside.
A design agency called Allies used this technique to rebuild their whole pipeline. They were hitting marketing manager gatekeepers on brand pitches. They flipped to selling social media retainers directly to MDs at £2,500/month. Inside six months they had a recurring base. Inside a year they were upselling larger projects from inside the accounts. The retainer was the foot in the door. The bigger work came because they were already there.
You won’t land every retainer this way. But if you don’t have one yet, this is usually how you start.
What to do this quarter
Three moves to start layering MRR now:
One. Audit your current revenue. What percentage is genuinely recurring (contracted, 12-month term, real lock-in) vs project-based? Be honest. Write the actual number down. Not “we have retainers.” The number.
Two. Pick one current project client and propose a retainer conversion. Take the last twelve months of projects they’ve done with you and repackage as a monthly commitment. Same total revenue, lower friction, more predictability for both sides.
Three. Draft one productised service tier. Pick your highest-volume service. Package it into a fixed-fee monthly offering with defined deliverables. Put it on your website as a package, not as “contact us.”
Those three moves alone can get your first 10-20% of MRR growing inside ninety days.
Where this sits in the bigger picture
MRR is one of the eight value levers buyers price. Strong MRR directly affects your multiple, which directly affects your valuation. For the full picture, read the agency succession planning guide and how to value a creative agency.
Cash flow discipline usually needs to come first though. No point building retainers if you can’t manage the cash they generate. See the agency cash flow guide for the four cash flow levers.
If you want to know where you sit on the recurring revenue lever right now, take the free Agency Valuation Calculator. Ten minutes. Shows you the gap between your current state and what buyers actually credit as recurring revenue.
If you want structured support turning project revenue into real MRR, that’s one of the eight levers inside the Strategic Growth Programme. Seven months, £18,000, we work through the levers in sequence. Most SGP clients see MRR move from under 20% to over 40% of total revenue inside the seven months.
Either way, the work starts with being honest about what your current “recurring” revenue actually is. Then you build.