The Harsh Reality of Margins
The average UK agency is operating at a 16% EBITDA margin under procurement pressure (NewDigitalAge, 2025). Buyers know that at that level, one bad quarter can erase profitability.
Compare that to 21–24% EBITDA, the benchmark range where agencies stop looking fragile and start commanding premiums. That’s the difference between a shop that seems stretched thin and one that looks bankable.
Margins are not just numbers on a P&L; they’re a proxy for resilience.
The Margin-to-Multiple Map
Buyers apply multiples based on profitability, not just size. Here’s what the spread looks like in practice:
EBITDA Margin / Valuation Multiple (EBITDA) / How Buyers See You
10–15% / 5–7x / Vulnerable, high risk
16–20% / 8–10x / Standard, “good enough”
21–24% / 11–14x / Premium, resilient
25%+ / 15x+ / Elite, category-defining
Revenue gets you on the radar. Margins decide which column you’re in.
Founder Pain: The Hidden Cost of Thin Margins
Founders often confuse busy with healthy. A swelling client list looks good in a pitch deck, but if margins are sitting at 15%, you’re already trading at a discount.
And here’s the brutal truth: buyers don’t pay for stress; they pay for efficiency.
- Hire ahead of revenue without discipline? Margins collapse.
- Chase top-line growth without automation? Delivery costs balloon.
- Take on procurement-heavy clients at thin margins? You’ve scaled fragility, not resilience.
Founder Anecdote 1: From Surviving to Premium
We worked with an agency sitting at 17% EBITDA margins. They were growing top-line, but every extra pound of revenue created more stress, not more value. Within 12 months of restructuring delivery and implementing automation, they achieved 24% margins.
That single move didn’t just improve cash flow; it reclassified their valuation. They went from market standard (8–10x) to premium (11–14x). The difference was tens of millions in enterprise value, created not by more clients, but by better margins.
Founder Anecdote 2: The Hidden Cost of Thin Margins
Another founder we advised was running at 14% EBITDA. Revenue looked strong, but when a buyer stress-tested the business, procurement pressure exposed brittleness and the deal stalled.
Once they rebuilt pricing discipline and cut delivery inefficiencies, margins rose to 21%. Only then did buyers return to the table. That extra seven points of margin wasn’t just operational breathing room; it was the difference between no exit and a viable one.
The Contrarian Take: Revenue is a Vanity Metric
Revenue may look impressive in headlines, but margins ultimately determine valuation in boardrooms.
That’s why financial engineering, the roll-up game of stacking revenue and cutting costs later, keeps collapsing. It scales spreadsheets, not businesses. And it’s why we believe the next wave of M&A will be won by agencies with operational discipline, not bloated top lines.
The Unusual Group Lens: How to Engineer Margins Buyers Reward
At The Unusual Group, we’ve codified what moves the dial:
- Operational Design: embed shared services and delivery frameworks that scale without bloat.
- AI Transformation: hardwire automation into processes within 10 weeks, delivering 30% efficiency gains.
- Pricing Discipline: shift away from procurement-driven discounts and protect margins at the proposal stage.
- Exit Readiness: package margins into a defensible story buyers trust, years before you think about selling.
These aren’t tactical tweaks. They’re survival levers.
Looking Ahead: Why Margins Will Matter Even More
By 2026, buyers will treat 21%+ EBITDA margins not as a premium but as a baseline. PE diligence is shifting from “how fast are you growing?” to “how resilient is your model?”. AI/data adoption checks will harden, and ESG and DEI metrics will be priced in.
Agencies that still run at 15% margins, hoping growth alone will save them, will not just trade at discounts. Many will be untradeable.
FAQs
Revenue might win you attention. Margins decide whether you survive the next wave of M&A.
As we tell founders again and again:
“Revenue is a vanity metric. Margins are a survival metric. And in M&A, survival gets paid.”
Download The Unusual Group’s Exit Readiness Checklist or book a confidential conversation about how to make your margins your biggest valuation lever.
