# Insights on agency growth, M&A strategy, and preparing for exit Source: https://felixvelarde.com/articles Drawn from 25 years of building, scaling, and selling agencies as a founder, CEO, chair and consultant [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The tell is what they've built](https://felixvelarde.com/articles/the-tell-is-what-theyve-built) Someone in Boston asked how to tell an agency that really operates differently with AI from one that mostly posts about it. The answer: look at what they've built. One agency turned itself around in three months. [Read More: The tell is what they've built](https://felixvelarde.com/articles/the-tell-is-what-theyve-built) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [A graphical treatment to distinguish AI-generated from human-created](https://felixvelarde.com/articles/a-graphical-treatment-to-distinguish-ai-generated-from-human-created) Icons that label AI content clearly and give people a way to identify human content. They are silly, they involve a really bad pun, and you are welcome to use them freely. [Read More: A graphical treatment to distinguish AI-generated from human-created](https://felixvelarde.com/articles/a-graphical-treatment-to-distinguish-ai-generated-from-human-created) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The white-label extinction](https://felixvelarde.com/articles/the-white-label-extinction) Most American SEO agencies resell the same white-labelled platforms. AI has called that bluff, and buyers see thirty thousand agencies with no reason to exist. [Read More: The white-label extinction](https://felixvelarde.com/articles/the-white-label-extinction) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [Bags of cash](https://felixvelarde.com/articles/bags-of-cash) In 2007 we showed Virgin Holidays every pound in returned twenty-six. The budget doubled. AI now asks every agency a blunt question. Efficiency is no answer. [Read More: Bags of cash](https://felixvelarde.com/articles/bags-of-cash) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [Buyers look under the hood now](https://felixvelarde.com/articles/buyers-look-under-the-hood-now) Serious buyers no longer settle for the polished management meeting. Strategy days, secret-shopper enquiries and candid client calls inspect the team beneath. [Read More: Buyers look under the hood now](https://felixvelarde.com/articles/buyers-look-under-the-hood-now) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [Pre-build the agency](https://felixvelarde.com/articles/pre-build-the-agency) Told his window had closed because valuations average three years, a founder started anyway. Most discount factors never reach the accounts. Offers followed. [Read More: Pre-build the agency](https://felixvelarde.com/articles/pre-build-the-agency) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The client concentration sum](https://felixvelarde.com/articles/the-client-concentration-sum) A $3m agency with a $1m client expects $2.4m at four times profit. The buyer prices it as the $2m agency it would be without that client, at two times: $800k. [Read More: The client concentration sum](https://felixvelarde.com/articles/the-client-concentration-sum) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [You didn't invent the multiple](https://felixvelarde.com/articles/you-didnt-invent-the-multiple) The going-rate multiple is the buyer's opening anchor and everything after it moves down. In the US, with more sellers than buyers, be clean or stay unsold. [Read More: You didn't invent the multiple](https://felixvelarde.com/articles/you-didnt-invent-the-multiple) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [A multiple is a measure of confidence](https://felixvelarde.com/articles/a-multiple-is-a-measure-of-confidence) Your multiple is not a grade for twenty years of work. It measures a buyer's confidence in cash flow after you have gone, and every visible risk lowers it. [Read More: A multiple is a measure of confidence](https://felixvelarde.com/articles/a-multiple-is-a-measure-of-confidence) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [Twenty per cent growth is standing still](https://felixvelarde.com/articles/twenty-per-cent-growth-is-standing-still) Take inflation, wage inflation and one lost client off a 20 per cent growth target and the agency ends the year where it started. Two years, three times. [Read More: Twenty per cent growth is standing still](https://felixvelarde.com/articles/twenty-per-cent-growth-is-standing-still) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [Your leadership team cannot scale you](https://felixvelarde.com/articles/your-leadership-team-cannot-scale-you) Your senior leadership team was hired to preserve what exists. Growth is a different job, done by a Growth Lab team drawn from every level of the business. [Read More: Your leadership team cannot scale you](https://felixvelarde.com/articles/your-leadership-team-cannot-scale-you) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [Swallows in a nest](https://felixvelarde.com/articles/swallows-in-a-nest) The charisma that gets an agency to its first million teaches the team to wait to be fed. Past two or three million that becomes a ceiling, felt as stress. [Read More: Swallows in a nest](https://felixvelarde.com/articles/swallows-in-a-nest) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The seven-week exit](https://felixvelarde.com/articles/the-seven-week-exit) The best deal I ever did, I left seven weeks after completion, because the agency already ran without me. The alternative is three years working for a boss. [Read More: The seven-week exit](https://felixvelarde.com/articles/the-seven-week-exit) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The earnout statistic](https://felixvelarde.com/articles/the-earnout-statistic) Six out of ten agency founders do not finish their own earnout, and buyers price that in. You become most valuable at the point you become unnecessary. [Read More: The earnout statistic](https://felixvelarde.com/articles/the-earnout-statistic) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The case study problem](https://felixvelarde.com/articles/the-case-study-problem) Good team, strong clients, four case studies on the website, the newest from 2022. One short case study a month roughly doubled contact page conversion. [Read More: The case study problem](https://felixvelarde.com/articles/the-case-study-problem) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The founder's network](https://felixvelarde.com/articles/the-founders-network) All ten of an agency's last clients came through the founder personally. Nine months later, 40 per cent of new business came through channels without him. [Read More: The founder's network](https://felixvelarde.com/articles/the-founders-network) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [How I built an AI version of Scale at Speed](https://felixvelarde.com/articles/how-i-built-ai-version-scale-speed) From a coffee app built on a rainy Saturday to Scale at Speed AI, distilled from the book, a 160,000-word course and terabytes of workshop video. [Read More: How I built an AI version of Scale at Speed](https://felixvelarde.com/articles/how-i-built-ai-version-scale-speed) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The quiet client](https://felixvelarde.com/articles/the-quiet-client) Three clients left in eight weeks with no complaints and high survey scores. The work had drifted into maintenance. Nobody had done anything wrong. [Read More: The quiet client](https://felixvelarde.com/articles/the-quiet-client) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The wrong hire](https://felixvelarde.com/articles/the-wrong-hire) A head of new business produced nothing in six months. The proposition could have described any mid-size agency. The next hire closed two clients in a quarter. [Read More: The wrong hire](https://felixvelarde.com/articles/the-wrong-hire) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The quarterly review](https://felixvelarde.com/articles/the-quarterly-review) An agency's first real quarterly review found designers at 115 per cent utilisation and the biggest service line the least profitable. Half an hour of clarity. [Read More: The quarterly review](https://felixvelarde.com/articles/the-quarterly-review) [Older Posts](#older-posts) ## Let’s talk If you’re serious about building significant value, preparing for an exit, or executing a roll-up strategy, get in touch below. I’ll respond personally. ## Older Posts [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The margin question](https://felixvelarde.com/articles/the-margin-question) His agency got 35 per cent faster with AI and clients asked for lower prices. He repriced around outcomes instead. Margins went from 22 to 34 per cent. [Read More: The margin question](https://felixvelarde.com/articles/the-margin-question) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The pitch gap](https://felixvelarde.com/articles/the-pitch-gap) An agency lost a pitch to a rival offering half the timeline for the same scope. The rival had rebuilt around AI. The founder had not known the gap existed. [Read More: The pitch gap](https://felixvelarde.com/articles/the-pitch-gap) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The missing rung](https://felixvelarde.com/articles/the-missing-rung) AI automated the research and first drafts that used to teach juniors how to think. A creative director rebuilt junior roles around judgment instead of output. [Read More: The missing rung](https://felixvelarde.com/articles/the-missing-rung) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The scope problem](https://felixvelarde.com/articles/the-scope-problem) AI made the team 40 per cent faster, so they said yes to everything and margins dropped eleven points. Faster is only more profitable if you take back the time. [Read More: The scope problem](https://felixvelarde.com/articles/the-scope-problem) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Measuring what works](https://felixvelarde.com/articles/measuring-what-works) Asked how she knew AI was working, a founder said she could feel it. Eight weeks of before-and-after tracking on three workflows turned that into evidence. [Read More: Measuring what works](https://felixvelarde.com/articles/measuring-what-works) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The native agency](https://felixvelarde.com/articles/the-native-agency) One founder rebuilt everything around AI: forty-two people to twenty-eight, same revenue, margins roughly doubled. AI as infrastructure rather than a tool. [Read More: The native agency](https://felixvelarde.com/articles/the-native-agency) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The AI hire](https://felixvelarde.com/articles/the-ai-hire) A new Head of AI spent three months on training sessions nobody used. Sitting with teams and fixing what took too long that week got them coming to him instead. [Read More: The AI hire](https://felixvelarde.com/articles/the-ai-hire) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The contract problem](https://felixvelarde.com/articles/the-contract-problem) A client sent an AI addendum and two weeks to sign it. A procurement exercise, not a confrontation, and it forced the governance work that was overdue anyway. [Read More: The contract problem](https://felixvelarde.com/articles/the-contract-problem) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Data leakage](https://felixvelarde.com/articles/data-leakage) Eleven people, four AI tools, three teams, and nobody knew where client data went. Regulated-client data sat in a free-tier tool. Fixing it took two weeks. [Read More: Data leakage](https://felixvelarde.com/articles/data-leakage) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Client value](https://felixvelarde.com/articles/client-value) She built a serious AI capability and pitched it as efficiency. Clients wanted to know what AI meant for their own business. The outward-facing answer wins. [Read More: Client value](https://felixvelarde.com/articles/client-value) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Team buy-in](https://felixvelarde.com/articles/team-buy-in) Three agency AI rollouts quietly failed as people drifted back to old habits. The problem was ownership, not resistance. People implement what they design. [Read More: Team buy-in](https://felixvelarde.com/articles/team-buy-in) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Knowing your level](https://felixvelarde.com/articles/knowing-your-level) Founders say their agency is at Level 2 or 3 on AI maturity. Ask about a legally reviewed policy, contract cover and data flows, and the answer is not yet. [Read More: Knowing your level](https://felixvelarde.com/articles/knowing-your-level) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [Shadow AI](https://felixvelarde.com/articles/shadow-ai) An eight-year financial services client was lost because a strategist used free ChatGPT under a 2019 NDA. Nobody had told her not to. No policy existed. [Read More: Shadow AI](https://felixvelarde.com/articles/shadow-ai) [AI and agencies](https://felixvelarde.com/articles/category/AI+and+agencies) ## [The governance gap](https://felixvelarde.com/articles/the-governance-gap) She thought her agency was at Governed on the AI maturity model. No written policy, no data map, 2022 contracts. Governed is where you can safely accelerate. [Read More: The governance gap](https://felixvelarde.com/articles/the-governance-gap) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The referral system](https://felixvelarde.com/articles/the-referral-system) Her new business came from referrals and she had no idea which clients sent them or why. A referral practice is a habit: know your advocates and ask. [Read More: The referral system](https://felixvelarde.com/articles/the-referral-system) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The pricing problem](https://felixvelarde.com/articles/the-pricing-problem) Day rates unchanged since 2020 meant the agency cut its price by RPI every year while clients raised theirs. Raise prices annually, without apologising. [Read More: The pricing problem](https://felixvelarde.com/articles/the-pricing-problem) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The annual offsite](https://felixvelarde.com/articles/the-annual-offsite) Two days in a country house produced a fifty-six-page strategy nobody could recall by January. Agencies that execute commit to fewer things, not tidier ones. [Read More: The annual offsite](https://felixvelarde.com/articles/the-annual-offsite) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The Growth Lab team](https://felixvelarde.com/articles/the-growth-lab-team) Strategy days produced plans nobody executed. A small team of future leaders who research, design and pilot the changes themselves changed the execution rate. [Read More: The Growth Lab team](https://felixvelarde.com/articles/the-growth-lab-team) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The earnout trap](https://felixvelarde.com/articles/the-earnout-trap) A founder celebrated his sale, then reread the earnout: three years of targets under someone else's strategy. Build the agency so the buyer does not need you. [Read More: The earnout trap](https://felixvelarde.com/articles/the-earnout-trap) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [The succession problem](https://felixvelarde.com/articles/the-succession-problem) A founder admitted most clients would leave if he did. Two years building a layer of people with real authority between him and them got a far better deal. [Read More: The succession problem](https://felixvelarde.com/articles/the-succession-problem) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [Client concentration](https://felixvelarde.com/articles/client-concentration) Founders guess their biggest client is 20 per cent of revenue. It is often 55. Above 30, buyers price the risk aggressively. Know the real number first. [Read More: Client concentration](https://felixvelarde.com/articles/client-concentration) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [Research, prototype, implement](https://felixvelarde.com/articles/research-prototype-implement) I once built a service line in a month and buried it in three. The method I use now is slow at the front: research, small pilot, then roll-out. [Read More: Research, prototype, implement](https://felixvelarde.com/articles/research-prototype-implement) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [A happier agency founder exit](https://felixvelarde.com/articles/a-happier-agency-founder-exit) A founder came to me wanting help selling their agency for several million dollars. After half an hour of pointy questions, I told them flat out: give it away instead… [Read More: A happier agency founder exit](https://felixvelarde.com/articles/a-happier-agency-founder-exit) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [The state of agencies](https://felixvelarde.com/articles/the-state-of-agencies) A very wide-ranging interview by best selling author Minter Dial in which Felix discusses his values, the state of the agency industry, the science behind – and methods for – scaling, the mechanics of profit growth, goal setting and much more. [Read More: The state of agencies](https://felixvelarde.com/articles/the-state-of-agencies) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [Agency M&A secrets](https://felixvelarde.com/articles/agency-m-and-a-secrets) A detailed presentation of the mechanics of agency M&A, including the financial motivation driving agency acquisition, how to maximise your agency’s sale value, how to address discount factors and how to create a great exit. [Read More: Agency M&A secrets](https://felixvelarde.com/articles/agency-m-and-a-secrets) [Selling your agency](https://felixvelarde.com/articles/category/Selling+your+agency) ## [How to maximise your agency’s exit value](https://felixvelarde.com/articles/how-to-maximise-your-agencys-exit-value) This eye-opening article reveals the real reasons buyers pay top dollar and provides a proven framework for maximizing your exit value, drawing from Felix Velarde’s unique experience of founding, selling and acquiring agencies. [Read More: How to maximise your agency’s exit value](https://felixvelarde.com/articles/how-to-maximise-your-agencys-exit-value) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [How to cure leadership procrastination](https://felixvelarde.com/articles/how-to-cure-leadership-procrastination) Exploring how leadership procrastination on major business decisions can be overcome by answering five key questions, emphasizing that effective leadership requires making decisive choices even when faced with uncertainty. [Read More: How to cure leadership procrastination](https://felixvelarde.com/articles/how-to-cure-leadership-procrastination) [Growing your agency](https://felixvelarde.com/articles/category/Growing+your+agency) ## [How to develop a winning value proposition for your agency](https://felixvelarde.com/articles/how-to-develop-a-winning-value-proposition-for-your-agency) Agencies can achieve greater success and value by identifying and focusing exclusively on a specialised niche where they can be the best, rather than trying to compete as a generalist against thousands of similar firms. [Read More: How to develop a winning value proposition for your agency](https://felixvelarde.com/articles/how-to-develop-a-winning-value-proposition-for-your-agency)