I've acquired and sold 7 agencies

I've acquired and sold 7 agencies over my career.

That experience gave me some opinions that most people in this industry don't share.

I want to walk you through five of them - simply because these perspectives have made me a lot of money and saved my clients from a lot of pain.

1. Sales and marketing should be the last thing you focus on to scale

This is heresy in an industry obsessed with lead generation. But hear me out.

If you're closing 1-3 clients per month, retention will outperform any sales initiative you could run.

The math isn't even close.

This is what I mean: 10% monthly churn creates a ceiling around $1.5M. Same agency, same closes per month, but with 5% churn? The ceiling is $3M. At 2.5% churn, it's $6M. At 1.25% churn, it's $12M.

Same sales. Same marketing. Wildly different outcomes.

I worked with an agency closing 10 deals a month at $3K each. Other consultants told them to get more leads. I looked at their 8% monthly churn and said: fix retention to 2% and you 4x the business without touching your pipeline.

Most agencies are trying to fill a leaky bucket faster.

Fix the leak first.

2. Fire people in under 3 months if they're not working out

This sounds harsh. But it’s kinder than the alternative - for everyone involved.

Here's the timeline I use:

Rockstar - you'll know in 7-14 days. The A-players announce themselves almost immediately. They ask better questions. They produce better work. They figure things out without being told.

Strong performer - you'll know in 30 days. They're not A-players, but they're solid. They do what's asked, they learn quickly, they don't create problems.

Solid contributor - you'll know in 2 months. They're fine. Not great, not terrible. They do the job.

If you don't know which one they are after 2 months, they're none of those.

Use month 3 to find their replacement and let them go before the probation period ends.

Keeping the wrong person for 6-12 months is expensive.

Not just their salary - the missed deadlines, the frustrated clients, the extra work everyone else picks up, the management time spent trying to coach someone who isn't going to work out.

Cut fast. It's better for everyone.

Quick note: I keep a few hours open each week for agency owners who want a second set of eyes on their operations. Book a call here if that's useful: https://www.agencyacquisitions.io/book-a-call/

3. Smaller and profitable is better than bigger at the same nominal profit

I've seen a 25-person agency doing the same topline revenue as a 50-person agency.

The 25-person agency runs at 45%+ EBITDA. The 50-person agency is under 10%.

Everyone at the smaller agency gets paid 20% more on average. The owner has more control. The business is easier to manage. Decisions happen faster. It's more attractive to buyers because it's more efficient.

And what most don't think about: when you have excess capacity, idle people cause problems.

Drama. Interpersonal conflict. Politics. Managers end up firefighting instead of doing strategic work.

The complexity of managing people doesn't scale linearly - it compounds.

Headcount is a vanity metric. Profit per person is what matters.

4. Employee problems are usually management problems in disguise

When an employee underperforms, the first questions I ask are about their manager, not about them.

Did their manager give them clear objectives and metrics? Do they know what they're accountable for, in rank order? Do they know how to do the work? Were they given SOPs, training, examples of what good looks like?

Almost always, the answer reveals gaps in management.

The majority of what I fix in agencies is management problems.

The dashboards, the systems, the accountability structures - they matter because they're required to hold people accountable. But they only work when managers use them.

Before you decide someone is a performance problem, make sure you haven't set them up to fail.

5. Higher customer acquisition cost usually means more profitable clients

Most agency owners have a fictitious cap on what they'll pay to acquire a client.

"I need to acquire clients for $2-5K max."

I have a client that spends $30-50K to acquire a single client.

That sounds insane until you see the math. They sell at $12-15K per month. Payback period is 4-5 months. Clients retain for 36-72 months. Business runs at 40%+ profit on $600K+ topline.

The more expensive a client is to acquire, the more profitable that client generally is.

Premium acquisition costs filter for premium clients who stay longer and pay more.

The agencies capping their CAC at $2-5K are competing for the same low-value clients everyone else is fighting over.

The ones paying $30K are playing a different game entirely.

These opinions aren't universal truths.

They're patterns I've seen work across dozens of agencies, including the ones I've personally bought and sold.

Take what's useful. Discard what isn't.

Nick