Client concentration, retainers and contracts in a marketing agency sale

General information, not legal, tax or financing advice. Contract, privacy, copyright and SBA rules depend on your documents and the law that applies, so confirm each point with your attorney, CPA or the buyer's lender.

Where do buyers draw the client concentration line?

Advisors publish different lines, and FE International publishes more than one. All of them measure your largest client's share of revenue; some add a test for your top three or five clients.

Palmer and FE give the strictest pair: no client above 10% and the top three below 25%, which FE says commands meaningful pricing premiums. Most of the other lines, including the buyer checklist in FE's general agency guide, put the trouble at 20% to 25% from one client.

FE's 1x to 2x discount is an estimate too; another section of the same page says 1.5x to 2x for one client at 30% to 40%. FE puts digital marketing agencies with $500,000 to $1 million of EBITDA at 3x to 5x. For an example digital agency with $750,000 of EBITDA, 1x to 2x off would mean $750,000 to $1.5 million less.

How to measure your own number

Karl Sakas, a marketing agency consultant, says the ideal test is each client's share of profit, with revenue share as a stand-in, and that the risk is a client above 20% for three months or more, not one large invoice month. FE International's standard diligence list includes revenue by client by month, so run it yourself first: the trailing 12 months and each of the last three years. Then make two adjustments before a buyer makes them for you:

• Net out pass-through costs. If you bill client media or production through your books, show each client's share net of those costs as well as of gross billings. The guide to what a marketing agency is worth explains which revenue figure buyers use.
• Show divisions separately. If your largest client is several divisions or brands that each hire you from their own budget, show it. TobinLeff says concentration can be mitigated by demonstrating fragmentation across large client entities, or a clear plan to diversify.

How common is a big client?

In Productive's 2025 survey of 235 agencies, 12.8% got more than 25% of revenue from one client, and 35.3% said their largest client was 10% of revenue or less. Treat that as a rough picture: Productive sells agency management software, the answers are self-reported, and about a third of respondents were not marketing agencies.

Why does one big client worry buyers so much?

A buyer pays now for several years of your earnings. Henry Corona, an M&A advisor writing on the Agency Management Institute blog in 2019, said experienced buyers expect an acquired agency's business to fall off 20% to 25% in the first year. A client worth a third of your revenue can cause a drop that size on its own.

A big client cutting back can also end the sale. TobinLeff, an M&A advisor to marketing and PR firms, calls client concentration a frequent due diligence red flag, and reports a deal that fell apart in diligence when the agency's largest client cut its long-term budget. SBA lenders test it too: under SBA SOP 50 10 8.1, effective October 1, 2026, a 7(a) lender financing an acquisition of $3 million or more must obtain a Quality of Earnings report that assesses customer concentration risk and contract continuity.

Clients tied to you, the founder

A buyer also asks whose relationship each client is. FE International's general agency guide puts the discount for agencies where the founder is the main rainmaker or client contact at 15% to 30%, with no data cited. BizBuySell's service-business guide lists customers committed to the owner rather than the brand as a liability. In Productive's survey, 71.9% of agencies were still founder-dependent.

If you personally run your largest client's account, you have both kinds of concentration at once. Lewis Silkin, a UK law firm, says that is why earnouts are popular in advertising and marketing deals: so much value sits with the founders and their key client relationships that buyers want the sellers to stay for a set period.

How do buyers structure a deal around a big client?

Often by paying you later for revenue they cannot yet count on. FE says concentrated agencies face heavier earnout-based structures on top of a lower multiple. Corona gave the reason: every buyer he had worked with looked at the cash return on its initial investment, and most did not want to wait three years to get their money back.

Earnouts tied to client revenue

At the small end, some buyers pay for a client book almost entirely out of what those clients go on paying. CyberOptik, which buys small web agencies' client books, describes paying the seller 80% to 90% of the monthly net recurring revenue from the acquired clients, typically for 24 months, with nothing up front, so client churn comes straight out of the seller's payment. Windhill Design, a web agency, bought about 100 clients spun out of a Connecticut web firm in 2017 for $30,000 down plus a 12-month earnout of 50% of recurring and 25% of project revenue.

Lewis Silkin says deferred payments are commonly based on a measure of future profit such as EBITDA, though they can use revenue. TobinLeff says 15 of 21 of its own recent agency deals included earnouts, with earnout consideration averaging about 28% of the purchase price. Either way, a big client that leaves after closing can cut what you are paid.

Earnout protections to ask for

Lewis Silkin lists seller protections that bar the buyer from removing the sellers or ending their employment other than for cause, from loading the business with costs that depress profit, and from moving key client accounts to another company in the buyer's group. The founder of Molzi, a UK Amazon-focused agency Brainlabs bought in 2021, recommends tying an earnout to something the seller controls, such as sales, rather than EBITDA.

Earnouts also tend to pay less than their maximum. Across SRS Acquiom's earnout data (private deals in all industries except life sciences, not agency sales), sellers received about one in five potential earnout dollars. The guide to earnouts in marketing agency sales covers cash at closing and how to read an earnout offer.

Holdbacks tied to a client

We found no published source that sizes a holdback or escrow to a large client in a marketing agency sale. The nearest benchmark is general: in the SRS Acquiom 2026 study summarized by the law firm Fasken, escrows in 2025 deals without representations and warranties insurance had a median of 11.1% of deal value, in deals mostly far larger than an agency sale. If a buyer proposes a holdback until a client renews or stays, ask what event releases it and on what date, and have your attorney put both in the purchase agreement.

SBA 7(a) buyers cannot use an earnout (SOP 50 10 8.1)

Under SBA SOP 50 10 8.1, a 7(a) loan financing a change of ownership cannot include a seller earnout, though a buyer rebate tied to performance is allowed if it pays down the loan. A seller note counts toward the buyer's required equity only if it is on full standby, with no payments, for the life of the 7(a) loan. So with an SBA-financed buyer, a large client can show up in the price or in a seller note's terms. Confirm the current rules with your attorney and the buyer's lender.

Are retainers worth more than project work?

The sources agree on the direction, but none has measured the size. The figures that circulate are estimates.

Promethean Research reports that most agencies mix time-and-materials, fixed-bid and retainer pricing, with only about 8% using a single model, so the question is usually your retainer share. Quiet Light, a broker of online businesses, says first-time buyers and corporate escapees look for smaller firms with clear systems, recurring retainers and documented processes.

A retainer is only as long as its notice period

Calling an engagement a retainer does not make the revenue contracted. Omnicom, a global holding company, says substantially all of its client contracts allow cancellation by either party on short notice, typically 90 days, without penalty. FE says client contracts of 12 months or more with auto-renewal clauses strengthen valuation significantly. Where contracts are short, a buyer looks at how long your retainer clients have actually stayed.

Promethean's surveys found about 42% of agencies report average retainer tenures above two years, and 30% above three, while about a quarter have typical retainer engagements under one year. An ANA and 4As study of agency-of-record relationships found average tenures of 7.3 years for integrated full-service agencies and 3.7 for media-only agencies, though those are not the clients a typical small marketing agency serves. A schedule of each retainer client's start date and renewals is the evidence a buyer can use.

Retainers paid in advance

If clients pay at the start of the month or prepay a quarter, the cash is for work you have not yet done. TobinLeff says some buyers treat client retainers received for future work, along with media advances and year-end bonus accruals, as debt: they exclude them from working capital and want the seller to deliver equal cash at closing. It advises recording client advance payments as deferred revenue, a liability, rather than as income when received. Ask your CPA to set that up before a buyer's accountant restates it for you.

Do your client contracts transfer when you sell?

That depends first on how the sale is structured. The table gives the general principles stated by Clark Wilson, a Vancouver law firm; in the United States the answer turns on each contract's wording and governing law.

A contract can also fail to transfer because of what it is. Clark Wilson says contracts are generally assignable, but not those personal in nature, involving personal relations or personal skills; it does not say whether a marketing agency's services agreement counts. FE International lists contracts that terminate on a change of control among the predictable red flags in a marketing agency sale.

We found no source on how often marketing agency client contracts carry change-of-control or termination-for-convenience clauses, so the reliable answer is to read yours.

Asking clients for consent

Asking for consent tells the client about the sale. Clark Wilson notes that seeking third-party consents raises confidentiality issues, and that the impact of not getting a required consent should be weighed, especially for material contracts. FE International's default is that clients hear at or just after closing, through a communication plan agreed with the buyer, and buyers' commercial diligence includes conversations with key clients late in the process. A consent clause in a big client's contract can force that conversation earlier.

The consent that matters most is usually your largest client's, because the price and any earnout are built around it. Agree early with the buyer which clients will be asked, by whom and when.

Who owns the ad accounts, analytics and creative?

A buyer of a digital or performance agency will ask which platform accounts and which work come with the business. The answer sits in each platform's rules and in your client contracts.

Google Ads

• An agency's manager account can own a client account, but the client account still owns its data and can remove the manager by unlinking.
• A client account has one owner. A manager that creates a new account owns it automatically; one that links an existing account does not, by default.
• A client that unlinks keeps its campaign history, but if it is on monthly invoicing paid through your manager account, its ads stop serving unless billing is moved first.
• Google requires a separate Google Ads account for each end-advertiser an agency manages, so client spend should not sit in a pooled agency account.

Meta

In Meta's Business Management API documentation, a business relates to an ad account either as its owner or as its agency. Claiming an ad account is a one-time step, after which it can be managed only in that Business Manager, and Meta says most marketing companies will not need to claim ad accounts from their clients. An owner cannot remove a confirmed ad account from its business; an agency can.

Map every account before a buyer asks

Neither platform says who owns an account under your contract with the client. For each client, list the ad accounts, who created each one, whose manager account or Business Manager it sits in, and who pays the platform. Do the same for analytics properties, tag managers and social pages, with who holds administrator access. Client-owned accounts are normal; a buyer needs a clear answer for each one. Partner badges are covered in the guide to selling a digital marketing agency.

Creative work and code

Under the Copyright Act, a work is “made for hire”, and so owned by the hiring firm, only if an employee prepared it within the scope of employment, or if it was specially commissioned for one of nine listed uses (such as a contribution to a collective work, part of an audiovisual work, a translation or a compilation) and both sides signed a writing that calls it a work made for hire. Our reading is that a standalone logo, website or campaign a freelancer made for you may not fit any of them; whether a particular piece does is a question for counsel. Otherwise, a transfer of copyright ownership (other than by operation of law) is valid only in a writing signed by the owner.

FE International names IP produced by freelancers who never signed assignment clauses as a predictable red flag, and advises contractor agreements that assign IP to the company and client contracts with clear ownership terms. Those papers show which deliverables belong to the client and which templates, tools or code your firm keeps.

Client customer data

If you hold client customer data, such as email lists, CRM records or ad audiences, check the terms you hold it on. Where California's CCPA applies, a service provider processes personal information for a business under a written contract that must bar it from using that information outside the contract's business purposes or outside its direct relationship with that business. Our reading is that whether such data can move to a buyer depends on the client contract, so include it in your counsel's review.

Self-check: how your client book looks to a buyer

Check your own numbers against these lines before you speak to a buyer. Measure client shares on the trailing 12 months of revenue.

What to fix before a sale

TobinLeff advises starting to address client concentration at least 12 to 18 months before a planned sale; another TobinLeff page says 12 to 24 months. The rest of this list fits in the same window. For the full sequence of a sale, see how to sell a marketing agency, step by step.

• Grow around your largest client rather than shrinking it. Concentration falls as other revenue rises. Check whether your largest client is also your most profitable one, since Sakas treats profit share as the better test.
• Renew and convert contracts. FE advises converting project relationships into retainers where the work is genuinely ongoing, pushing renewals so contracts are fresh at the time of sale, and confirming they are assignable. Where you can, move to terms of 12 months or more with auto-renewal.
• Build the revenue-by-client schedule: three years by month, tied to your P&Ls, with start dates and renewals for each retainer. TobinLeff also advises reviewing three years of monthly margin data, because unexplained spikes or dips surface in due diligence.
• Move client relationships off your desk. Put an account lead between you and each top client, and give that person time to own the relationship before a buyer meets them.
• Clean up the paperwork. Read every assignment and change-of-control clause with your attorney, starting with your largest clients. Collect signed IP assignments from freelancers and contractors, map the accounts, and ask your CPA how to book advance retainers.