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When it comes to agency valuations, you know that revenue is one the key factors that gets taken into account.
You’re also aware that to understand the value of your company, the type of your revenue gets looked at, too. Recurring income will generate greater overall value for your business. In other words, your agency will score higher in an agency valuation if most of your revenue comes from long-term contracts.
As with most things, money is important, but there’s more than that. Even in business. There are ways to increase the value of your agency without increasing your revenue.
You may have a hunch about which factors can influence your agency valuation, but scroll on as we highlight a few.
1. Brand Image
While it may seem immeasurable at times (Yeah, PR agency, can you please ship us that report on how our brand awareness has increased in Q3? Oj, thanks.)—brand image is a thing, and something you should work on.
What does your website visitor receive when they land on your page? Is your design and copy in line with what your agency really has to offer? When did you last update your portfolio or share a case study? We all know how freshening up logos and getting a rebranding done influence our audience’s perception.
Positive brand image can be measured to some extent, using media coverage KPIs, social media metrics, marketplace or job ad sites. Great brand reputation leads to attracting and retaining top talent. Top talent leads to kindling new client relationships. Healthy and prosperous client relationships lead to a growing business, and all that leads to a better agency valuation figure.
2. Management Structure and Workflow Management
One thing that’s extremely important for potential agency buyers are answers to:
How will the agency function once it’s sold?
How robust is your management team?
How well is your organization set up?
Do you run your agency’s workflow on a digital platform and how is information managed?
The answers to these questions should:
Inspire agency leaders to reevaluate their operations and processes
Determine where there’s room for improvement
The more your workflow is documented and your organization is, well—organized, the better your agency valuation will be.
3. Employer Branding, Employee Happiness
Here’s another factor that can make or break your agency: employee happiness. Your agency’s branding as an employer can positively influence your evaluation.
Does your agency attract top talent? Can you boast fantastic work-life balance, proven benefits, and low employee churn rates? These are all factors that will amplify your brand image and the final price you can get on your business.
4. Lower Overhead Expenses
In a much more hybrid-working setup since 2020, offices have become less popular, but still necessary for fostering culture. But with so many employees coming into the office twice per week, agencies are searching for optimal solutions.
Reevaluating agency overhead costs such as office space rent is worth a try. The more overhead your agency has, the more overhead expenses you will need to sell to a potential buyer.
5. Strong Client Relationships
Last but not least: relationships. This factor is somewhat linked with brand image and employer branding. In short, imagine you’re selling your agency. Your agency is a living organism, a business that will continue to work after you sell it.
Now, imagine you sell it to someone without explaining how difficult communication is with three of your top five clients, who bring in over 25% of your annual revenue. If your client relationships aren’t set on healthy foundations and are looking prosperous down the road, this is something you’ll need to be honest about during your agency valuation, because client relationships can affect how well your agency will be doing in the future.
To learn about more factors that influence your agency’s valuation, check this article out: The Basics of Agency Valuations.
Understand Where Your Agency Stands
Getting to know how much your agency is worth and being able to benchmark against peers is insightful, to say the least. Learn what you can improve to increase your value on the market, grow or shape your agency’s future.