Prepping Your Agency for Sale: Beyond The Basics

Hey there, Welcome back to Agency Finance Letters. This one will be a 5 min read.

Most agency owners think selling means months of preparation. Recently, we worked with a client who had built strong financial foundations from day one. Because of this groundwork, we were able to help them list their agency in under a week - and they received multiple Letters of Intent through GoMerge (an agency-focused M&A platform). More importantly, they felt well prepared for the detailed due diligence that was to follow.

1. The Simple 12-Month Forecast What buyers actually want to see:

• Revenue by client (with contract lengths)

• Confirmed renewals/expansions

• Team costs and structure

• Operating expenses

• Growth initiatives

Pro tip: Use actual client contracts and historical data, not optimistic projections.

2. The Key Man Risk Check Buyers' biggest concerns:

• Founder dependency for sales/relationships

• Critical team members without backups

• Client concentration risk

• Process documentation gaps

• Transition readiness

Pro tip: If you can't take a 2-week vacation, you have key man risk.

3. Clean Data Matters Essential documentation:

• Separated personal/business expenses

• Clear owner compensation structure

• Historical invoice collection data

• Client contracts and terms

• Team agreements and roles

4. Team Structure That Sells What to demonstrate:

• Clear reporting lines

• Backup for key roles

• Documented processes

• Training systems

• Growth paths

5. Revenue Stability Strengthen your position with:

• Long-term client agreements

• Diversified client base

• Predictable revenue streams

• Clear expansion opportunities

• Stable margins

6. Common Deal Breakers Watch out for:

• Messy financials

• High client concentration

• Undefined processes

• Owner dependency

• Missing documentation

7. Your Secret Weapon: Deep Understanding Having crystal clear metrics and KPIs gives you power in negotiations:

• Customer Acquisition Cost (CAC)

• Customer Lifetime Value (LTV)

• Net Revenue Retention

• Client Churn Rate

• Gross Profit Margins

• Revenue Per Employee

• Client Acquisition Channels

• Average Revenue Per Client

• Team Performance Metrics

• Growth Rate by Service Line

Pro tip: A solid financial model isn't just for buyers - it helps you understand your agency's true value and growth potential.

Remember: Knowledge is leverage in negotiations.

Want help understanding your agency's true value? Just hit reply.

Till next week,
Joey

P.S. Even if you're not planning to sell, having clear metrics makes your agency more valuable.