What a buyer asks for first
- Revenue split between recurring retainers and one-time projects
- Top five clients by revenue, with contract terms
- Signed IP assignment from every employee and contractor
- Utilization, billing rates and gross margin by month
- Who holds client relationships and how long developers stay
Recurring Revenue Beats Project Revenue
Two agencies with $3 million in sales can sell for very different prices. The one with monthly maintenance, hosting and support contracts is worth more than the one that starts every quarter at zero. Buyers pay for predictability.
If your revenue is mostly projects, sort the clients who come back year after year from the ones who do not. Repeat work counts for more than a long pipeline of first-time buyers.
Where the Value Sits
An agency has few hard assets. Its value is its people, its processes and its relationships. That makes three things matter more than almost anything else.
- Developers who stay, and a manager who runs delivery without you
- Clients who know more than one person on your team
- A repeatable way of scoping, estimating and billing work
Code and IP Ownership
Buyers check who owns the work. Every employee and contractor should have signed an agreement assigning what they write to the company, and your client contracts should say what you own and what the client owns.
A gap here can delay a closing or cut the price.
Open source licenses and any reused components should be documented. Surprises in diligence read as risk.
Client Concentration
When three clients make up a third of revenue, a buyer sees a business that could lose a third overnight.
Buyers often discount for that, or tie part of the price to keeping those clients through an earnout. Start broadening the base well before you sell.
Agency or Product?
An agency with a small product of its own is often priced as a services firm until the product shows steady recurring revenue. Keep the books for each line separate so a buyer can see what each earns.
Staying After the Sale
Buyers of agencies often want the owner to stay for a transition period of six months to two years, sometimes with part of the price paid over time. Think through whether you want that before you meet buyers.
Read what your business is worth to a buyer for the earnings math, plan with the twelve month guide, and request a valuation check when ready.