How much is your agency worth? Most agency owners either have no idea or are wildly wrong. I’ve seen founders overvalue by 3x because they heard a number at a conference. I’ve seen others undervalue by half because they didn’t know what buyers actually pay for.
I built a creative agency in Belfast over 13 years, scaled it to £2.2M revenue, and sold it for a multi-7 figure sum. I now help agency owners understand and increase what their businesses are worth.
This guide covers everything: how valuations work, what multiples UK agencies actually sell for, and the specific factors that make buyers pay more or walk away.
The 3 Agency Valuation Methods
There are three ways to value a creative agency. Buyers typically use all three and triangulate.
Method 1: EBITDA Multiple (Most Common)
This is the standard for UK agency transactions.
The formula:
Agency Value = Adjusted EBITDA x Multiple
EBITDA stands for Earnings Before Interest, Tax, Depreciation, and Amortisation. In plain English: your operating profit before the accountant gets creative with it.
“Adjusted” means adding back any expenses that are personal to you as the owner. That company car, the salary you overpay yourself, the conference in Marbella. These get normalised to show the true profit a buyer would inherit.
UK creative agency multiples typically range from 3x to 7x EBITDA. Where you land in that range depends on the 7 factors I’ll cover below.
Example:
- Agency revenue: £1.2M
- Adjusted EBITDA: £240k (20% margin)
- Multiple: 4.5x
- Valuation: £1,080,000
Method 2: Revenue Multiple
Used more for fast-growing agencies where profit hasn’t caught up with revenue yet. Also common in US-influenced transactions.
The formula:
Agency Value = Annual Revenue x Multiple
UK agency revenue multiples typically range from 0.5x to 1.5x revenue. Digital agencies with strong recurring revenue can occasionally command 2x.
Example:
- Agency revenue: £1.2M
- Revenue multiple: 0.8x
- Valuation: £960,000
Revenue multiples are less reliable because they ignore profitability. A £1.2M agency at 25% margin is worth significantly more than a £1.2M agency at 8% margin. Buyers know this.
Method 3: Discounted Cash Flow (DCF)
Projects future cash flows and discounts them back to today’s value. Used more by sophisticated buyers and private equity.
This method matters most when your agency has strong growth trajectory. If you’re growing 30%+ year on year, a DCF captures future value that a simple multiple misses.
Most agency transactions below £5M use EBITDA multiples as the primary method. But knowing all three gives you negotiating leverage.
The 7 Valuation Drivers Framework
These are the seven factors that determine where your agency lands on the multiple range. I’ve seen each one add or subtract a full turn of multiple.
Driver 1: Recurring Revenue
The single most powerful valuation driver.
Recurring revenue means retainers, subscriptions, managed services, and ongoing contracts. Anything that repeats without needing to be resold.
The benchmarks:
| Recurring Revenue % | Impact on Multiple |
|---|---|
| Under 10% | Reduces multiple significantly |
| 10-25% | Below average |
| 26-40% | Solid foundation |
| 41-60% | Strong. Buyers get excited |
| Above 60% | Premium territory. Top multiples |
At my agency, we had zero recurring revenue for most of its life. Every month started at zero. It was stressful and it suppressed what we were worth. Today I tell every client: get to 40%+ recurring before you think about selling.
Quick wins: Convert project clients to retainers. Introduce maintenance packages. Bundle hosting and support into monthly fees. Package analytics reporting as a monthly service.
Driver 2: Profit Margins
Buyers multiply your profit to determine value. Higher margins = higher base number = higher valuation.
The benchmarks:
| Net Margin | Signal to Buyers |
|---|---|
| Under 12% | Below average. Operational concerns |
| 12-15% | Average UK agency |
| 15-20% | Good. Well-managed business |
| 20-30% | Excellent. Premium multiple territory |
| Above 30% | Outstanding. Rare and valuable |
Improving your margin from 12% to 24% at the same revenue literally doubles your valuation. This is the fastest lever to pull.
Driver 3: Owner Dependency
This is where most agencies fail.
If the business can’t operate for 30 days without you, it’s not a business. It’s a job. And buyers don’t pay premium multiples for jobs.
The Owner Dependency Test:
- Can the agency win new business without you on the call?
- Can projects be delivered without your creative review?
- Do clients have relationships with your team, not just you?
- Can your team make day-to-day decisions without your approval?
- Could you take a 4-week holiday with no email and nothing breaks?
If you ticked fewer than 3, you have an owner dependency problem. This alone can reduce your multiple by 1-2x.
My Owner Extraction Method is the framework I use with clients to systematically solve this in 90 days.
Driver 4: Client Concentration
How much of your revenue comes from your top client? Your top 3?
The benchmarks:
| Top Client % of Revenue | Risk Level |
|---|---|
| Above 40% | Critical risk. Buyers may walk |
| 30-40% | High risk. Significant discount |
| 20-30% | Moderate risk. Noted in due diligence |
| 10-20% | Manageable. Normal range |
| Under 10% | Low risk. Premium territory |
If losing one client would cripple your revenue, a buyer sees that as buying a liability, not an asset. Diversify before you sell.
Driver 5: Revenue Trend
Are you growing, flat, or declining? The direction matters as much as the current number.
Three years of consistent growth tells a compelling story. Three years of decline tells a very different one. Flat revenue is better than declining but doesn’t excite buyers.
What buyers want to see:
- 3 years of audited accounts showing growth
- Year-on-year revenue increase of 10%+
- Margin improvement alongside revenue growth
- Pipeline that shows the trend continuing
Driver 6: Systems and Documentation
Documented processes make a business transferable. If everything lives in your head, a buyer is paying for something they can’t fully own.
The Systems Checklist:
- Documented onboarding process for new clients
- SOPs for every core service you deliver
- CRM with full pipeline and client history
- Project management system with standardised workflows
- Financial reporting that produces clean monthly P&L
- Team handbook covering operations, policies, and procedures
- Documented sales process from lead to close
At Kaizen, I created detailed SOPs for every single service we offered. That’s what allowed us to hire and train people quickly. It’s also what made the business attractive to buyers.
Driver 7: Team Quality and Depth
Buyers are acquiring your team’s capability, not yours. A strong team with tenure and depth commands a premium.
What buyers assess:
- Average team tenure (longer = more stable)
- Management layer beneath founder
- Key person risk (would anyone leaving cripple the business?)
- Employment contracts with notice periods and non-competes
- Skills coverage (can the team deliver everything without hiring?)
UK Agency Valuation Multiples by Type
Not all agencies command the same multiples. Here’s what the UK market looks like in 2026:
| Agency Type | Typical EBITDA Multiple | Revenue Multiple |
|---|---|---|
| Digital marketing (SEO, PPC, social) | 4-6x | 0.8-1.5x |
| Design and branding | 3-5x | 0.5-1.0x |
| Web development | 3.5-5.5x | 0.7-1.2x |
| PR and communications | 3-5x | 0.5-1.0x |
| Full-service / integrated | 4-7x | 0.8-1.5x |
| Specialist / niche (e.g., healthcare, fintech) | 5-8x | 1.0-2.0x |
What pushes you to the top of the range:
- High recurring revenue (40%+)
- Low owner dependency
- Diversified client base
- Strong growth trajectory
- Documented systems
- Specialist positioning
What pushes you to the bottom:
- Project-based revenue only
- Founder-dependent operations
- Top client over 30% of revenue
- Declining or flat growth
- No documented processes
- Generalist positioning
How to Calculate Your Agency’s Valuation: Step by Step
Step 1: Calculate Adjusted EBITDA
Start with your net profit from last year’s accounts. Then add back:
- Owner’s salary above market rate (if you pay yourself £150k but a replacement MD costs £80k, add back £70k)
- Owner’s personal expenses run through the business
- One-off costs that won’t recur (office move, legal dispute, redundancy)
- Depreciation and amortisation
- Interest payments
This gives you your adjusted EBITDA.
Step 2: Average Over 3 Years
Buyers look at a weighted average, not just last year. Use:
(Year 1 x 1) + (Year 2 x 2) + (Year 3 x 3) / 6
This weights the most recent year highest while smoothing out anomalies.
Step 3: Apply the Appropriate Multiple
Based on your agency type and the 7 drivers above, estimate where you sit on the multiple range. Be honest with yourself.
Step 4: Adjust for Deal Structure
Most agency sales include an earn-out. Typically 50-70% upfront and 30-50% over 1-3 years tied to performance targets. Factor this into your planning.
Step 5: Get Professional Validation
This self-assessment gives you a starting point. Before approaching buyers, get a formal valuation from an M&A advisor who specialises in agencies.
The Agency Valuation Scorecard
Rate your agency honestly on each driver. Score 1-5 for each.
| Driver | Score (1-5) | Notes |
|---|---|---|
| Recurring Revenue | ___ | 1 = under 10%, 5 = over 60% |
| Profit Margins | ___ | 1 = under 12%, 5 = over 25% |
| Owner Dependency | ___ | 1 = nothing works without you, 5 = fully extracted |
| Client Concentration | ___ | 1 = top client over 40%, 5 = top client under 10% |
| Revenue Trend | ___ | 1 = declining, 5 = growing 20%+ |
| Systems & Docs | ___ | 1 = nothing documented, 5 = comprehensive SOPs |
| Team Depth | ___ | 1 = just you, 5 = full management layer |
| Total | ___/35 |
Your score means:
- Under 15: Significant work needed. Focus on fundamentals before considering a sale.
- 15-20: Building. You have a real business but gaps are suppressing value.
- 21-28: Growing. Solid foundation. 12-18 months of focused work could get you exit-ready.
- 29-35: Exit-ready territory. Your agency has the fundamentals buyers pay premium for.
5 Things That Destroy Agency Valuations
1. Over-reliance on the Founder
If you are the business, there’s nothing to sell. Buyers are acquiring future cash flows. If those cash flows disappear when you leave, the valuation reflects that.
2. Single Client Dependency
One client representing 40%+ of revenue is a deal-killer. Even at 30%, buyers will discount heavily or structure the deal to protect themselves.
3. No Recurring Revenue
Project-based agencies start every month at zero. That unpredictability terrifies buyers. Even converting 30% of revenue to recurring changes the conversation.
4. Declining Margins
Revenue growth with declining margins tells buyers the business is getting less efficient as it grows. That’s a red flag.
5. Messy Financials
If your accounts are a mess, buyers either walk away or discount significantly. Clean, audited accounts for 3+ years are non-negotiable.
The Earn-Out: What to Expect
Most UK agency transactions include an earn-out component. Here’s how it typically works:
- Upfront: 50-70% of the agreed price paid at completion
- Deferred: 30-50% paid over 1-3 years, tied to performance targets
- Targets: Usually revenue retention, profit maintenance, or growth targets
- Your role: Most earn-outs require you to stay for 12-24 months post-sale
The earn-out protects the buyer. It ensures you don’t take the money and leave before the transition is complete.
Negotiating tips:
- Push for higher upfront percentage
- Ensure targets are achievable and clearly defined
- Get legal advice on what happens if targets aren’t met
- Understand the working capital requirements
Frequently Asked Questions
How much is a creative agency worth?
UK creative agencies typically sell for 3-7x adjusted EBITDA (annual profit). For an agency doing £1M revenue at 20% margin (£200k profit), that’s a valuation range of £600k to £1.4M. The exact multiple depends on recurring revenue, owner dependency, client concentration, growth trajectory, and systems documentation.
What multiple do agencies sell for?
UK agency EBITDA multiples range from 3x to 7x, with most transactions landing between 4x and 6x. Digital and specialist agencies command higher multiples. Revenue multiples range from 0.5x to 1.5x. Agencies with 40%+ recurring revenue and low owner dependency achieve top-of-range multiples.
How do I increase my agency’s valuation?
Focus on the 7 Valuation Drivers: increase recurring revenue, improve profit margins, reduce owner dependency, diversify your client base, maintain growth trajectory, document your systems, and build team depth. Improving margins from 12% to 24% at the same revenue doubles your valuation.
When should I start preparing to sell my agency?
Start 2-3 years before your target exit date. You need time to improve your valuation drivers, clean up financials, reduce owner dependency, and build the systems that make the business transferable. Starting too late means selling for less than you should.
Do I need a broker to sell my agency?
For transactions under £1M, you may be able to run the process yourself with good legal and financial advisors. Above £1M, a specialist agency M&A broker (like Merge or Baringa) can run a competitive process that typically achieves 15-30% higher prices than direct sales.
What’s Your Agency Actually Worth?
Take the free Agency Valuation to get your score across all 7 drivers. It takes 3 minutes and gives you a clear picture of where you stand and what’s holding your valuation back.
If you’re scoring well and considering an exit in the next 1-3 years, Exit Advisory provides hands-on support through the entire process. I’ve been through it. I know what buyers ask, what kills deals, and what gets you the best outcome.
If you’re earlier in the journey and want to build toward an exit-ready position, Scale coaching focuses on the fundamentals: margins, systems, team, and reducing owner dependency. The same things that make a great business to run also make a great business to sell.
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