The 34% Problem: Why Agency Founders Need a New Playbook

Founders don’t fail because they can’t win clients or deliver good work. They fail because they build fragile businesses. Fragility shows up in three predictable ways:

1. Project Addiction

Most agencies are busy but not bankable. Living off short-term projects may look great in the pipeline, but investors and buyers see volatility. Without retainer-based revenue, you are running on adrenaline, not cash flow.

Data point: Agencies with 70%+ recurring revenue command 10x+ EBITDA multiples. Project-heavy shops rarely exceed 5–6x.

The Unusual Group’s experience: One founder we worked with converted 40% of their project clients to retainers within nine months. Churn halved, margins doubled, and the agency became suddenly attractive to institutional buyers.

2. Founder Dependency

When everything runs through you, the founder, you are not building an agency; you are building a job you cannot quit. Without succession planning or leadership depth, buyers discount risk, staff churn accelerates, and valuation collapses.

Data point: 30% of staff leave agencies each year. Founder over-reliance accelerates attrition.

The Unusual Group’s experience: A founder who brought in a COO ahead of revenue reduced their operational workload by 60%. That freed them to focus on growth and reassured investors that the business could scale without them.

3. No Exit Infrastructure

Here’s the hard truth: most founders say they want to sell one day, but less than 10% have a written exit plan. No systems, no financial discipline, no tech defensibility. When buyers open the hood, they see promises, not platforms. That’s when deals die.

Data point: 65% of Q1 2025 UK marketing M&A deals involved PE. The majority were bolt-ons, not platform buys, because too few agencies are exit-ready.

The Unusual Group’s experience: We’ve seen valuations double when agencies simply documented systems, contracts, and financial discipline 24 months ahead of an exit. Buyers pay for predictability, not potential.

We call these the Fragility Traps.

Fragility Trap

Project addiction → volatile cash flow

Founder dependency → no succession

No exit plan → buyers walk

Service shop only → commoditised

Survival Lever

Retainer revenue → 60–70% predictable income

Leadership depth → senior hires, succession plans

Exit readiness → clean financials, scalable systems

Tech/data moats → AI, IP, defensible platforms

Fragility is engineered. So is survival.

Why do so many founders drift into these traps?

Part of it is comfort in chaos. Winning projects feels exciting. Being indispensable to every decision feels powerful. Pushing exit planning down the road feels like focus. But what feels good in the moment creates brittleness over time.

The other factor is identity. Many founders see themselves as creatives or problem solvers first, and business architects second. That bias leads them to prioritise growth in work delivered over growth in systems built, which is exactly why buyers mark them down.

Founders obsess over valuation multiples. Buyers obsess over resilience.

In diligence, the number one thing investors test is not your top-line revenue but your contract quality. They ask:

• How predictable is the revenue stream?
  
  
• What happens if one client leaves?
  
  
• Can this business scale without collapsing under its own weight?
  
  

Resilience is what underpins multiples. And resilience does not come from charisma or creativity. It comes from infrastructure.

Failure isn’t inevitable because of the market. The UK ad industry is growing, digital budgets are rising, and demand is strong, which makes agency fragility even harder to excuse.

Why do one in three agencies disappear within five years?

Because capital without systems is fuel poured on sand.

You can grow top-line revenue, hire fast, and even win awards. But if you have not built the infrastructure buyers actually pay for, you have engineered fragility into the foundation.

Most founders unknowingly step onto the wrong flywheel:

Fragility Flywheel‍

Fragility → Client churn → Cash flow volatility → Underinvestment → More fragility.

The Unusual Group flips it into a survival flywheel:

Survival Flywheel‍

Infrastructure → Stable margins → Attractive to capital → More infrastructure.

The lesson? You do not escape fragility by chasing more revenue. You escape fragility by building infrastructure first.

At The Unusual Group, we have seen the pattern repeat across dozens of founders. The agencies that survive, scale, and sell do not just chase revenue; they also focus on delivering value. They build around four levers, buyers' reward:

• Retainer Revenue: 60–70% of income tied to contracts, not campaigns. Predictability is everything.
  
  
• Leadership Depth: Senior hires are made ahead of revenue, with succession plans that mitigate founder risk.
  
  
• Tech/Data Moats: Proprietary dashboards, AI integration, and defensible IP that make you more than a service shop.
  
  
• Exit Readiness: Documented plans, clean financials, and infrastructure built years before a deal.
  
  

These are not “nice to haves.” They are the difference between being priced as inevitable or irrelevant.

The market already rewards those who get this right:

• Traditional service shops: 9.3x EBITDA
  
  
• Tech-enabled agencies: 12–15x EBITDA
  
  

That is a 20–40% premium for building infrastructure and embedding technology. By 2026, if you still look like a service shop instead of a platform, you will not just be valued lower. You will be priced as irrelevant.

In the last decade, 70% of agency roll-ups failed. Not because they lacked capital, but because they lacked infrastructure.

• Hire too late? Competitors eat your pipeline.
  
  
• Chase growth without infrastructure? Margins collapse.
  
  
• Take the wrong capital? You lose control of your agency.

What does building survival actually look like? This is where we differ from traditional investors and coaches.

• Capital + Infrastructure: We pair minority stakes with embedded operational systems. Not advice. Not bureaucracy. Actual infrastructure.
  
  
• The Unusual Method™: An eight-phase roadmap distilled from £200M+ in exits. From early-stage growth to AI transformation and final-stage exit preparation.
  
  
• AI Transformation: We hardwire AI into core processes in 10 weeks, delivering 30% efficiency gains. Not a 12-month rollout. Not optional. A foundation.
  
  
• Cohort Power: Agencies don’t scale alone. Our peer cohorts create accountability and shared intelligence that coaching never achieves.
  
  

This is not about “helping” founders. It is about multiplying them.

Exit readiness is not a last-mile sprint; it is a sequence built years in advance. That is why it is baked into The Unusual Method™. In practice, it unfolds in distinct phases that we have proven across dozens of founders:

• Revenue Architecture (early in the journey): Agencies that move from project-led to retainer-led models establish predictability. Without this, valuation premiums are impossible.
  
  
• Leadership Design (the next stage of maturity): Building management depth and succession plans reduces single-point dependency and reassures buyers the agency can scale without the founder at the centre.
  
  
• AI Transformation (embedded early, not bolted on): Agencies that integrate proprietary tools and automation into their core delivery unlock efficiency gains and defensibility long before diligence begins.
  
  
• Exit Readiness (the final stage before market): Packaging systems, contracts, and financials into a buyer-ready story removes uncertainty and accelerates deals.
  
  

When executed in the right order, these steps compound resilience, stabilise margins, and expand multiples. The result is simple: buyers see a platform, not a promise.

In short: the Exit Timeline is not separate from the Method. It is the Method in action.

A Founder Story

One agency we backed had grown well on projects, but its founder was exhausted. By helping them hire ahead of revenue, shift clients to retainers, and embed automation into delivery, the results came fast: within 12 months, revenue doubled, churn halved, and margins expanded. When buyers came knocking, they were not buying potential; they were buying a platform.

Case Contrast: Fragility vs Resilience

Take two mid-market agencies we studied.

• Fragile Agency: £3.5m turnover, 15 staff, 80% project-driven. The founder runs all client relationships, with no written exit plan. Burnout rising. They grew fast in year one but plateaued, and when one client left, 25% of revenue disappeared overnight. Buyers passed.
  
  
• Resilient Agency: £3.5m turnover, 18 staff, 70% retainer-driven. The leadership team oversees daily operations, utilising a proprietary reporting tool. Succession plan documented. They doubled valuation in three years, not because they were bigger, but because they were bankable.
  
  

Same revenue, different multiples. Infrastructure made the difference.

Looking Ahead: Why This Matters More by 2026

By 2026, investors will not treat resilience as a premium. They will treat it as a baseline. AI/data diligence will be a standard practice. Founder rollover equity will be expected. ESG and DEI reporting will be priced in.

Agencies that still resemble service shops will not only trade at discounts, but they will also struggle to trade at all.

That is why founders cannot treat resilience as optional. It is already being priced today, long before you ever sell.

Final Word

Agency failure is not inevitable. It is engineered by ignoring the infrastructure buyers actually pay for.

The flip side is just as true. Survival is engineered, too. With the right systems, the right capital, and the right playbook, agencies stop being fragile and start being irresistible.

As we tell founders at The Unusual Group:

“Failure is not inevitable. It is engineered. So is survival.” Luke Tobin