What Are Buyers Looking For?

How to Get Ready Years Before You Sell

Most agency owners think about selling the way they think about a big pitch: dust off the credentials, polish the numbers, and hope the room likes you. The trouble is that buyers don’t decide in the room. They decide based on what they find when they open the hood, and by then it’s far too late to change much.

We’ve been involved in a fair few agency deals alongside clients, on both the preparation side and the diligence side. The same themes come up again and again. Below is what buyers are actually weighing up, and what you can do about it long before anyone sends you an NDA.

Buyers are buying your agencies future

It sounds obvious, but it changes how you should think. A buyer is paying today for profit they expect to receive tomorrow. Everything they look at, from client lists to staff structure to your accounts, is really a test of one question: how confident can I be that this business will keep earning without the person who built it?

Keep that question in mind and most of what follows will make sense.

Dependence on the founder

This is the big one, and it’s where many agency sales wobble. If you are the best salesperson, the creative director, the key client relationship and the person who solves every crisis, a buyer sees risk rather than a business.

What helps:

– A second tier of leadership who own client relationships and delivery, and who the buyer can meet and trust.
– Sales that don’t run exclusively through you. Even a modest pipeline process owned by someone else is a strong signal.
– Evidence you can take a proper holiday without things falling over.

Start this early. Handing over relationships takes a year or two to do properly, and buyers can tell when it’s been done in a rush for the sale.

Quality and shape of revenue

Not all revenue is equal in a buyer’s eyes. They’ll look closely at:

Recurring versus project work. Retainers and contracted work are more valuable than one-off projects, because they’re more predictable. If most of your income is project-based, that doesn’t rule you out, but you’ll need to show a consistent pattern of repeat business.
Client concentration. If one client is a large share of your income, expect questions, and likely a lower price or a deal structure that protects the buyer if they leave. Many buyers get uncomfortable when a single client sits above a modest share of revenue, so it’s worth working to spread the risk.
Client tenure and retention. Long relationships say you deliver. A revolving door says the opposite.
Contract terms. Are there written agreements? What are the notice periods? Can the client walk away at short notice? Do contracts allow assignment or change of control? Clients on handshake deals are a headache in diligence.

Buyers will also ask how the work was won. Referrals and inbound enquiries say something different from relying on a handful of personal contacts.

Profit, and whether it’s real

Revenue gets attention, but buyers pay for profit, usually measured as adjusted EBITDA. This is where a lot of owners get a shock, because “adjusted” involves judgement and buyers will challenge it.

Common issues:

Owner pay. If you pay yourself a small salary and take the rest as dividends, a buyer will adjust to what it would cost to hire a replacement MD. Sometimes that reduces profit meaningfully.
Add-backs. One-off costs and personal expenses run through the business can be added back, but only if you can evidence them. A long list of “exceptional” items every year invites scepticism.
Margins. Buyers compare your gross margin and utilisation against what they see elsewhere. Thin margins can point to underpricing, bloated freelance spend or poor scoping.
Freelancers. Heavy reliance on freelancers can flatter or distort the picture, and can raise IR35 and employment status questions.

Clean, timely management accounts matter here. If you can produce monthly numbers with a clear view of profit by client or service line, you’re ahead of most. If your accounts only come together once a year for the tax return, start fixing that now.

Financial housekeeping and tax

Diligence will go through your finances in detail. The quicker and cleaner the answers, the more confidence you create. Things buyers and their advisers typically check:

– Consistent, accurate VAT and PAYE filings, with no outstanding queries.
– Treatment of contractors and freelancers, and any employment status exposure.
– R&D tax relief or other claims, and whether they’re properly supported.
– Directors’ loan accounts, and any messy personal and business crossover.
– Working capital: debtor days, how reliably clients pay, and whether work in progress is recognised properly.
– Revenue recognition, especially for retainers billed in advance and projects spanning year-ends.

A tidy set of records saves weeks in a deal, and weeks matter, because deals lose momentum and sometimes die in the gaps.

The team

Buyers acquire people as much as clients. In creative, digital, PR and media agencies in particular, your people are the product. They’ll want to know:

– Who the key people are, and whether they’re likely to stay.
– Whether there’s a sensible structure, with clear roles and a plan for progression.
– Staff turnover, and the reasons for it.
– Whether contracts are in place with sensible notice periods, confidentiality and IP assignment, and appropriate restrictive covenants.
– How reliant you are on one or two star performers.

Don’t wait until a deal is live to think about retention. If your best people have no stake in your success, consider whether share options, incentive plans or other arrangements make sense. Doing this well takes advice, so involve your accountant and a solicitor early.

Positioning, niche and reputation

Buyers like agencies that are clearly something. A specialism, a sector focus or a distinctive service offering makes you easier to understand, easier to value and often more attractive than a generalist. “We do a bit of everything for anyone” can work, but it’s harder to defend.

They’ll also consider:

– Your reputation and case studies, and whether clients will speak well of you if asked.
– Whether your services are in growing areas or declining ones.
– How exposed you are to platform changes, algorithm shifts or technology that could automate parts of what you do. Expect increasingly pointed questions about AI.
– Whether your brand has value beyond your own name.

Intellectual property, contracts and legal basics

This is the dull part that causes real problems. Make sure you can answer yes to the following:

– Do you own the IP in your own work, tools and processes, and have you clearly assigned or licensed IP to clients as intended?
– Do freelancers and employees assign IP to you?
– Are third-party licences, such as software, fonts and stock imagery, properly in place?
– Are your client terms sensible, with appropriate limits on liability?
– Is your data protection house in order, including GDPR compliance, data processing agreements and security practices?
– Is there any current or threatened dispute?

Gaps here rarely kill a deal, but they can lead to price reductions, warranties and indemnities, or money held back until issues are resolved.

Fit: why this buyer, and why you

Different buyers want different things. A trade buyer might want your clients, your capabilities or your geography. A private equity-backed group might be building a platform and looking for scale. A management buyout or employee ownership structure is a very different conversation again.

Whatever the route, buyers think about fit and what the combined business becomes. Can your culture survive integration? Do your services complement theirs? Do your clients overlap or conflict? You don’t need to chase specific buyers early, but knowing what makes you strategically interesting helps you build in that direction.

Deal structure: the part owners underestimate

It’s worth understanding early that the headline price isn’t the whole story. Many agency deals include:

– Part of the price deferred, or paid as an earn-out tied to future performance.
– A requirement for you to stay on for a period.
– Restrictions on what you can do afterwards.
– Adjustments for cash, debt and working capital at completion.

An earn-out is where all of the above comes home to roost. If the business depends on you, or key clients are shaky, more of your price is likely to be tied to future performance. The stronger the business looks without you, the more cash you’re likely to see at completion. Tax planning also matters, as the structure of the deal can have a significant effect on what you actually keep. Take advice well before you agree anything.

A practical roadmap: what to do and when

Two to three years out

– Reduce founder dependency and build your leadership team.
– Move towards recurring revenue where it makes sense.
– Tackle client concentration.
– Improve your management reporting.

One to two years out

– Tidy contracts, employment terms and IP arrangements.
– Clean up your tax and compliance position.
– Review your pricing and margins.
– Put retention arrangements in place for key people.
– Get a realistic view of your valuation from an adviser.

Six to twelve months out

– Prepare a data room with your key documents organised.
– Consider commissioning your own pre-sale review, so you find the issues before a buyer does.
– Be ready to explain your adjustments and forecasts clearly.
– Assemble your advisory team: accountant, corporate finance adviser and solicitor.

The takeaway

Buyers reward agencies that are predictable, profitable, diversified and not dependent on one person. None of that happens in a few months, which is exactly why the best time to prepare is long before you intend to sell. Even if you never go to market, the work makes you a stronger, more valuable and more resilient business.

If you’re thinking about an exit, even in the distant future, we’re happy to talk it through. An early conversation about where you stand today can save a lot of pain, and a lot of value, later on.