The concentration question
The rule of thumb in agency M&A is straightforward. Any single client over 20% of revenue is a risk flag. Two clients over 15% each is a pattern. Three clients accounting for more than half your revenue is a problem the buyer will price in heavily.
The logic is mechanical. If one client churns and represents 25% of your revenue, the buyer has lost a quarter of their acquisition's cash flow overnight. They're not going to take that risk on your word that the relationship is strong. They're going to discount the price.
The fix takes time. You can't diversify a client base in 60 days. But you can stop the problem getting worse. New business effort weighted toward smaller accounts in different sectors. Pricing changes that bring lower revenue clients up rather than letting the big ones expand further. Sometimes, deliberately turning down expansion work from a dominant client because the concentration cost outweighs the revenue.
Most founders find this counterintuitive. Growing the biggest account is the path of least resistance. But if you're heading to exit in 18 to 24 months, the and revenue durability matters more than the top-line growth rate.
Contract length as a valuation lever
Two agencies. Same revenue. Same client list. One has 3-month retainers with 30-day notice. The other has 12-month contracts with auto renewal clauses. They will not get the same multiple.
The buyer is purchasing future cash flow. Future cash flow that's locked in by contract is worth more than future cash flow that depends on monthly retention. The discount for short notice arrangements isn't trivial. On a £2M EBITDA business at a 5x multiple, the difference between rolling retainers and annual contracts can be £1 to 2M of enterprise value.
This is one of the most addressable valuation levers in any agency. Most founders haven't tested whether their clients would accept longer commitments because they've never asked. The clients who say yes give you a higher multiple. The clients who say no tell you something useful about the relationship that the buyer was going to find out anyway.
Start the conversations 12 to 18 months before going to market. Renewal cycles are the natural moment. Bundle the longer term with a pricing improvement or a service enhancement so it doesn't read as a one-sided ask.
The personal relationship problem
If the founder is the relationship, the founder is the risk.
Buyers don't pay full multiple for revenue that walks out the door when you do. They model retention assuming the founder leaves within 12 to 24 months of close. Any client whose retention depends materially on the founder personally gets discounted in their internal model, even if they're paying full price on paper.
The work of transferring relationships takes longer than founders expect. It's not a matter of introducing a new account director on a Zoom call. It's a multi-quarter process of moving from "the founder is the primary contact" to "the founder appears occasionally" to "the founder is the escalation point but not the daily relationship."
Start 18 months before you plan to go to market. Identify the 5 to 10 client relationships that meaningfully depend on you personally. Build a transition plan for each. The senior person who's taking it over needs to be in every important meeting, copied on every important email, and visible to the client as the operating relationship for at least 12 months before closing.
The founders who do this work see it reflected in the multiple. The founders who don't, find out about it in diligence when the buyer asks to interview the top 10 clients.
Pitching during diligence season
A subtler issue. Once you're in an active sale process, your ability to win new business drops significantly.
Three reasons. First, your attention isn't really available. Diligence is a full-time job for the founder, even with good advisors. The data requests, the management presentations, the buyer questions, all of it pulls focus from anything that isn't the deal.
Second, you can't talk about the process. Pitches happen in a context where you can't share the most important thing about your business right now, which creates an undercurrent of strangeness in conversations with prospects who might pick up on it.
Third, longer sales cycles become impossible to close in your name. Any prospect doing meaningful diligence on your agency might find out about the deal, and once they do, they often wait to see what happens before committing.
The trade-off most founders don't anticipate: the period of strongest financial scrutiny is also the period when topline growth becomes hardest to deliver. If your numbers need to keep growing through the deal process, you have a problem.
The solution is to load the new business effort into the 12 months before the process starts. Build the pipeline before you need it. By the time you're in active diligence, your job is to protect the existing book, not chase new logos.
The pattern across all four
Every one of these issues compounds over time and resolves slowly. None of them can be fixed in the final 90 days. All of them can be meaningfully improved over 12 to 24 months of deliberate work.
That's the work that determines the multiple. The client list you bring to market in 18 months is being built by what you do now.
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