Eric Siu explains how small ad agencies can scale faster by partnering with other specialized agencies. Combining EBITDA and cross-selling services can grow revenue from $5M to $40M, while higher margins and a 10x valuation multiple substantially increase company value.
I would say if you're a small ad agency, I don't know why people don't do this, just join forces with a ton of other agencies. Let's just say there's this guy named John and his agency's called Jack and Jill Marketing. And Jack and Jill Marketing does $5 million in revenue and $1 million in profit. Then you got a partner here called Brad's Agency that specializes in social media and they also do $1 million in profit. And then you got Eric's Agency, not Eric Siu, but a different Eric, that does $1 million in profit and they do paid ads on Facebook and Google. Then you have Neil's Agency, not me, A different Neil that just does email marketing. And then you got Emma's agency that just does conversion rate optimization and she does $1 million in profit. So you start combining them all, you're like, huh, you got $5 million in EBITDA there if you just each took 20% of the company. But now if you start cross-selling services, maybe you start growing to $40 million in revenue. You start getting to $40 million at 20%, you're now looking at 8. And if you're worth 10 times, that's $80 million.
