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One of the downsides of starting and building an agency is lack of scale.
Agencies have strong profit margins, but they grow linearly. For every client you bring on, you have to do more work. This means hiring more employees, building more systems, and increasing expenses.
It’s not like a digital product you can create once and sell infinitely.
Why Agencies Are Hard To Sell
It’s also difficult to sell agencies. They sell at much lower multiples than other business models. For example, if you have an agency that generates one million dollars a year in revenue, you’d be lucky to sell it for 2.5X, which would be two million five hundred thousand.
That may sound like a lot of money, but most of the time it’s based on an earn out. That means there’s no clean break and you’re still working. In many cases, it’s not even worth it.
The Solution
But there is a solution.
In this week’s video, I show you the exact flywheel I use to attach a scalable tech product or directory to my agencies. This way, when the time comes, I can sell it for a 9X multiple.
Leverage is the key.
Enjoy. :)
Love you guys. Talk to you tomorrow.
Tim
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