Agency consultancy revenue

The thing about a
consultancy
is that it's impossible to assign a monetary value. Its value comes not from any asset owned, but rather the contracts it services. Skills + relationships. Hard to put a dollar value on that.

Startups with products can be given a net value some multiple of their recurring revenue. This is because they own their product.

When owning a product you can lose half your team and not have it directly impact
revenue
. Sure it'll slow you down and make it harder to maintain the product or add new features... but you have the ability to hire new talent to cover the workload in time. With a product you can, and will, lose customers, but still get new ones with that same product.

When looking at an agency, one might argue that it's worth nothing at all in market value. How would anyone ever be able to trust that things would remain the same after purchase? What if the top talent jets off once the owner sells, because they had loyalty to their boss but they don't give a damn about the new owner?

You could say that maybe the sale must come with some stipulation of the owner sticking around a few years to ensure the ship continues to run smoothly. But you'll have no guarantee that they won't be jacking off as soon as the sale goes through.

These are all concerns one might have around selling a consultancy. And I can tell you that this is what worried me most when I inherited my previous boss' agency. I wasn't buying it with my own money of course. Instead through an odd series of events, I had become the person my boss considered the best suited to take the reigns without everything going to disaster.

To tell you the truth I thought everything would go to disaster. I didn't believe in myself and was trying to come up with ways to decline opportunity. But then one day I heard him talking to one of our anchor clients about me. About how much trust he had in me and how the team was only going to get better from then on out.

Hearing that was too much for my ego. And I guess I convinced myself that yes I would make a good fit for the role. What's the worst that could happen? Well we could've lost all our clients and then I would've had to fire a bunch of people and then I would have to make up a story that spun all of that in a positive light when looking for a job, but that didn't sound too bad.


Westcity