Valuation hub
Understanding your agency's value
What drives the value of an agency or marketing business, how buyers think about it, and what the numbers in an offer mean. Written by Motion Advisory Partners for founders, with six guides by business type.
- A note on these pages
- They explain how value is assessed. They do not estimate the value of any business, and nothing here is a benchmark, a market statistic or advice on your circumstances. For that, talk to us.
Six things that shape what a buyer will pay
Buyers look at the whole business, but the conversation tends to return to these factors.
Financial performance
Revenue, gross margin and profit, usually expressed as EBITDA and adjusted to a normalised figure that reflects the business as a buyer would run it. Trend matters as much as the latest year.
Revenue quality
How much income is retained or contracted, how visible next year's revenue is, and how dependent the business is on winning new projects to stand still.
Client concentration
How much revenue depends on the largest clients, how long they have been clients and how they are contracted. See client concentration.
Leadership
The strength of the team beneath the founders, who holds the client relationships and whether the business would run without the people who are selling it.
Specialism
A clear position in a defined market is easier to value, and easier to sell internally within a buyer, than a broad general offer.
Buyer interest
Value is set by what buyers will pay, and different buyers value the same business differently. Knowing who has appetite, and why, is part of understanding value.
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Plain language
Enterprise value, equity value, consideration and timing
Four ideas that cause the most confusion in early conversations.
Enterprise value
The value of the business as an operating whole, before taking account of its cash and debt. When people talk about a multiple of EBITDA, they are usually describing enterprise value. See the glossary entry and EBITDA multiple.
Equity value
What the shareholders receive for their shares. It is derived from enterprise value by adjusting for cash, debt, debt-like items and working capital relative to an agreed normal level. The adjustments depend on the agreed mechanics of the transaction, and they can be material. Enterprise value is never automatically the cash paid to shareholders. See equity value.
Consideration
How the equity value is paid: cash on completion, deferred consideration paid later, contingent amounts such as an earnout, or shares in the buyer (rollover equity). Two offers with the same headline can be worth very different amounts to a seller.
Timing
When money arrives, and what has to happen first. Completion mechanics such as locked box or completion accounts affect both timing and certainty.
Valuation guides by business type
The factors above apply everywhere, but each type of business has its own version of the questions. Six guides, each written by us for a specific model.
- 01Digital marketing agency valuationRevenue mix, client retention and the balance of retained and project income.
- 02Creative and brand agency valuationProject pipelines, founder dependence and reputation as an asset.
- 03PR and communications agency valuationRetainers, relationship concentration and the people who hold the accounts.
- 04Experience and events business valuationProject economics, working capital and repeat business.
- 05Content and production business valuationRights, project mix and repeat commissions.
- 06Marketing technology business valuationProduct ownership, revenue quality and customer retention.
Supporting resource
Motion OS
Motion OS is the operating system behind our work: the research, intelligence and benchmarking layer that every mandate runs on, tracking current multiples, deal risk and buyer appetite across the markets we cover.
It is built for our own use. The one part we have opened up is the valuation calculator on this page, which runs on the same scoring and multiples. It does not replace a conversation with us about your business.
Related resources
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