Our valuation approach starts with the full business
Many valuation conversations begin with a simple question: “What multiple will I get?”
Multiples matter, but they are only one part of the picture. Before thinking about the final number, we first try to understand the actual business.
That includes:
- What services the agency provides
- How revenue is generated
- How much revenue is recurring
- How profitable the business is
- How concentrated the client base is
- How involved the founder is day to day
- How easily clients and operations can transition
From there, we can form a more realistic view of value.
We evaluate adjusted EBITDA
For established, profitable agencies, adjusted EBITDA is one of the most important valuation inputs.
Adjusted EBITDA helps estimate the true ongoing earnings of the business after normalizing owner compensation, one-time expenses, and other items that may not continue after a sale.
We look at adjusted EBITDA to understand how much cash flow the agency produces under normal operating conditions.
Learn more: Adjusted EBITDA for agencies.
We evaluate revenue quality
Revenue size matters, but revenue quality matters more.
Two agencies with the same revenue can be valued very differently depending on how that revenue is structured.
We look closely at:
- Recurring vs project-based revenue
- Client retention and churn
- Revenue by service line
- Margins by service type
- Pricing consistency
- Scope clarity
Predictable revenue is generally more valuable than one-time, irregular revenue.
Learn more: Recurring revenue and agency valuation.
We look closely at client concentration
Client concentration is one of the biggest risk factors in agency valuation.
If a large percentage of revenue comes from one or two clients, the business may be more vulnerable after a sale.
That does not mean the agency cannot be valuable. It simply means we need to understand the risk clearly.
We consider:
- How much revenue comes from the largest clients
- How long those clients have been with the agency
- Whether contracts are in place
- Whether the relationship depends on the founder
- How likely the client is to transition smoothly
Learn more: Client concentration and agency valuation.
We consider service alignment
Freshy is not just buying revenue. We are evaluating whether the agency’s services can be supported well inside our operating model.
Service alignment matters because it affects client continuity, delivery quality, transition difficulty, and long-term growth potential.
Agencies with services that align well with Freshy’s capabilities may be easier to transition and support.
This can include agencies focused on:
- Website design and development
- WordPress support and maintenance
- Hosting and website care
- SEO services
- PPC management
- Email marketing or CRM support
- Ongoing digital support
Learn more: What types of agencies we buy.
We evaluate operational clarity
Operational clarity helps us understand how the agency actually works.
We look at:
- How clients are onboarded
- How work is scoped and priced
- How projects and retainers are managed
- How billing is handled
- How client communication works
- How issues are escalated
- How much knowledge lives with the founder
Clear operations reduce transition risk and make it easier to preserve value after close.
See also: How to prepare your agency for sale.
We evaluate founder dependency
Founder dependency plays a major role in valuation.
If the founder owns most of the client relationships, sales process, delivery oversight, and institutional knowledge, the business may be harder to transition.
That does not mean the agency cannot be acquired. It simply means the transition plan becomes more important.
We evaluate:
- Who manages key client relationships
- Who handles delivery and execution
- Who sells new work
- Who understands the systems and processes
- What support is needed after closing
Learn more: What happens after you sell your agency.
We use multiples in context
Valuation multiples are useful, but they should not be viewed in isolation.
A multiple reflects risk, predictability, and buyer confidence.
For example, an agency with clean recurring revenue, low churn, diversified clients, and clear operations may support a stronger multiple than an agency with the same EBITDA but higher transition risk.
Learn more: Agency valuation multiples.
We think about deal structure alongside valuation
Valuation and deal structure are closely connected.
The headline number is important, but so is how the purchase price is paid.
Riskier agencies may require more deferred consideration, seller financing, or performance-based structure. Lower-risk agencies may support cleaner terms and more confidence at close.
Learn more: Agency deal structure.
We do not expect every agency to be perfect
No agency is perfect.
Most agencies have some mix of strengths and risks. The goal is not to check every box. The goal is to understand the full picture clearly enough to determine whether there is a good fit.
An agency may still be attractive even if it has:
- Some project-based revenue
- Some client concentration
- Founder involvement
- Incomplete documentation
What matters is whether those risks are understandable, manageable, and transitionable.
How our valuation process usually works
A typical valuation conversation starts with a high-level review of the business.
We may look at:
- Revenue and profit
- Service mix
- Recurring revenue
- Top clients
- Team structure
- Founder goals
If there is alignment, we can go deeper into financials, client structure, operational fit, and potential deal terms.
Learn more: Our acquisition process.
Want to understand how Freshy would value your agency?
If you are considering selling, we can help you understand how your business may be evaluated and what factors may impact valuation.
Request a confidential valuation conversation
Frequently asked questions
How does Freshy value agencies?
We evaluate financial performance, adjusted EBITDA, revenue quality, recurring revenue, client concentration, service alignment, operational clarity, and transition risk.
Does Freshy use EBITDA or revenue multiples?
We may consider both depending on the agency. Established profitable agencies are usually evaluated with adjusted EBITDA, while smaller or less normalized agencies may also be reviewed using revenue.
What increases agency valuation?
Recurring revenue, strong retention, clean financials, low concentration, clear operations, and reduced founder dependency can increase valuation.
Can I get a valuation if I am not ready to sell?
Yes. Understanding your valuation now can help you identify what to improve before a future sale.
Does Freshy only buy perfect agencies?
No. We understand that every agency has strengths and risks. We look for businesses where the risks are understandable and the transition can be handled thoughtfully.
