The State of the Digital Marketing Agency Business with Azim Nagree

Josh, thank you so much to you and your team. Thanks to everyone else who's been here today. I really love the opportunity to present and talk with any of your audiences. It's such a great group of folks, all who are striving to be better, build up agency, do better work for the clients, better work for the employees. So I love having any opportunity to talk with you at any time I can. By way of background, for those who have not yet met me, my name is Azim Nigri, head of M&A origination at Adherium by Digitale. Inbound Digital, it's a private equity-backed company that's acquiring agencies that focus on legal, dental, medical, and home services spaces. As Josh mentioned, some of the acquisitions that you may have heard about: Hennessy Digital, which we did at the beginning, around this time last year. Blueshark Digital, we started off with TNT Dental. We're now up to a total of 6 acquisitions, which is phenomenal. We've got another one closing, fingers crossed, in a couple of weeks, and hopefully putting another LOI out in the next week or so. Strong momentum in 2025. Strong momentum in 2026, which we're really excited about. As Josh mentioned, I had the privilege of talking at another Symfig Agency event in Miami last year, and that was really on the topic of mergers and acquisitions, the role of private equity in the agency space. Happy to answer any questions that people might have about either of those topics, especially after today's conversation, or happy to have a phone call with anyone. Or an email exchange afterwards. I'll have my contact information available to anyone after the call. But today's topic is really about the state of digital marketing in 2026. And so to Joshua Nelson's point, what we did at the end of last year, the beginning of this year, was talk to some of the agency owners within the portfolio, talk to agency owners that are outside of the portfolio. And we just wanted to get a sense of finger on the pulse from them. What are some of the key things that they're thinking about in 2026? Some of their biggest opportunities, some of their biggest worries, some of the biggest concerns. Obviously AI was one of them. We'll talk more about that, but it was really around just state of the state. And one of the things that we really tried to lean into was that there are lots of different industry reports out there, the state of this, et cetera. But they typically talk about the nuances of digital marketing, things like trends in SEO, trends in AI, trends in other areas. What we wanted to do was get to the heart of the agency owners, folks like yourself. What are some of the things that are top of your mind? And what are the things that you are thinking about as you go into 2026? And to the best of our knowledge, we didn't see anyone actually asking that question of agency owners. So that's what we really indexed on, and that's what we ought to talk about. We interviewed a number of folks, and the purpose of today's conversation is to really cover off some of those key findings. Okay. So it's going to be a presentation. I'm going to go through some of the key stats, but I beg of you, please ask questions, please make comments. Otherwise, this is going to get really boring. You do not want to just listen to me talk at you for an hour or so. This is meant to be very interactive. I'd love to hear about comments. What's been your experience? As you all know, one of the key benefits of getting together in a forum like this is hearing from other agency owners. So if you've got something to share that you think might be of interest to other folks on the call, please just drop that into the chat or to Joshua Nelson's point earlier, unmute yourself, ask that question, make that comment. That's where the real value comes in. Is in that sharing amongst each of the community members. Okay. With that said, hopefully you can still see the screen. Should say key themes.

Looks really good.

So look, there were 3 main themes that came out of the survey. None of these are going to be groundbreaking, but we thought 2 things. Number 1, it's actually validating all of you to hear that the things that you're concerned about and worried about and thinking about are actually the same things that everyone else. Is thinking about. So I think just that validation point can be extremely powerful. And then the second big takeaway is that even within those themes, there are actually quite a few nuances. And so we definitely want to take some time to explore those as well, which we'll do in a little bit. But 3 broad themes. Most agencies are expecting 2026 to be a strong revenue growth year. Everyone's very bullish. Everyone's optimistic for the most part. We'll talk more about some of the caveats that go along with that, but definitely everyone's focused on growth as being the number one business priority for them going into 2026. Second big theme, of course, is AI. And the really interesting thing that we found from the survey is that there's a real big disconnect. When it comes to AI. Everyone's talking about it, but there's a big difference in the action that people are doing versus the talk that they're saying. So we're going to explore that a little bit as well. And the third big theme is mergers and acquisitions is a really hot topic. Thank goodness that most agencies are very interested in exploring buying and/or selling their agency. If you've been inundated with inquiries from financial buyers, from people who want to invest in your agency, it's certainly, you're not alone. And the fact that people are looking at what that means for them, that's something again that we'll talk about. The point is that those are going to lead to dollars if you go down the path of either buying and selling. So those are the key themes that we're going to cover off today. Let's dig into those. So the first one is around that revenue and that growth. Look, there's a strong sense of optimism from all the agency owners that we surveyed, that we spoke with. They're feeling really bullish about 2026 and actually very aggressive with respect to their growth goals. 80% of them are expecting to achieve revenue growth of 15% or more. Two-thirds of them are putting revenue growth as their number one business priority. I'd love to hear from the group. 15%, is that higher or lower than what you set your goals for 2026? Just drop that in the chat real fast.

Higher, lower, drop it in the chat. I'd say lower.

Yeah.

Most of this is lower.

Yeah.

No one bigger than 15%. Yeah.

That's absolutely it. I love that. And I think it just reinforces that optimism and bullishness that people have. Now, probably a little bit of bias here, but many of the agencies that sort of participate in the survey are probably a little bit on the larger side. Smaller. Yeah.

These are smaller agencies versus 10 million-plus agencies that you're serving.

Exactly. Yeah. So I said 10 million is bigger, is a bigger number. Something we learned a bit too late at Scorpion is that when you're 300 million of revenue, 20% growth is definitely challenging. But no, I think that's very, what I'm seeing in the chat is very consistent with what we saw in the results, which is everyone's looking to grow and everyone's looking to grow very aggressively, which is great. And look, to be honest, the statistic doesn't surprise me that much. And the reason being is that unless there's something pretty cataclysmic happening in the outside world, agency owners are entrepreneurs and entrepreneurs by their nature is really generally very bullish about the future. Again, the 15% growth target doesn't really surprise me. The fact that you are all looking for the most part higher targets also doesn't surprise me. So that's not unexpected.

Ziv, if you don't mind me chiming in on this one, I think it should be encouraging because I don't know about you guys, but if you're listening to podcasts and the videos coming out on YouTube, it's very doom and gloom. It's like AI's coming, it's going to eat everybody's lunch. And if you focus on that, you're going to lead to that outcome. But the reality is him and his team are looking at the biggest, most successful agencies. They're investing hundreds of millions, if not billions of dollars into this industry. And they believe positively that things are going to continue to grow. Revenue's going to continue to expand. And so that should give you a little bit of confidence and a little bit of, hopefully a little bit of encouragement if you're starting to maybe feel doom and gloom a little bit.

Yeah, I love that point, Joshua Nelson. Again, the articles, the blogs, all of them talk about is digital marketing dead? And I think the answer that we all inherently know is no. Our clients need us to be doing their digital marketing for them or doing their agency work for them. Cs are not dying. And in fact, agencies, I think, are going to be even in more demand because our clients are trying to figure out how to navigate the AI landscape as well. And they look to each of us to be an expert. They need us more now than ever because we know what's happening and we are going to be able to help them. Navigate through this constantly changing world. What is interesting with respect to growth though, is there's a challenge that most agency owners don't necessarily realize they have yet, which is to support that growth, they need to hire more staff, but hiring more staff is becoming more challenging because of inflation and wage costs. And so those combined factors put an immense amount of pressure on margins. And so it doesn't surprise me again to see that the number 2 business priority is around margins. So everyone wants to grow. They realize that they need to grow. They need to hire staff, but in a world where it's harder to do so and harder to do more cost-effectively, they're seeing margin compression there as well. That's a really interesting point that comes out of what we saw in the data. Show of physical hands or virtual hands, who's seen some level of struggle to hire good people, period, and hire good people at reasonable wages and reasonable costs? It's obviously very easy to go and pay an account manager $200 grand, but yeah, and I think you're seeing it both in the physical and the virtual is that this is real. What the data is sort of bearing out is real. We'll talk about more about what agencies are doing to try and offset this. But if you're feeling this tension between needing to growth, needing to grow with the needs of hiring, it's definitely, you're not alone there. This is a consistent trend across the industry. Before I move on to our next theme, or should I, let me wrap up this theme first. For me, the sort of key takeaway from this is obviously you want to keep that growing, but how do you make that transition from headcount-driven growth over to margin-protected scale? Talk more about that in a moment, but that is, I think, the key takeaway that the survey respondents we spoke with are struggling with. Sounds like you guys are struggling with as well. And so again, the big validation here is if this is something that's keeping you up at night, you know, you're not alone. This is definitely— Josh, before we move on to the next topic, any sort of thoughts around what you're hearing from community members as they navigate this challenge?

I think trying to find good quality talent is a challenge and trying to retain trained talent is a challenge. So a lot of us are smaller agencies, so we're hiring young blood, right? Hiring someone right out of college or maybe even still in college. Getting them trained up and capable, and we're able to pay a lower wage. But once they're in that role for 2 to 3 years, they're going out and getting offered much higher jobs. And so not just getting good talent, but retaining that talent is also a big challenge, which impacts profitability and margins and everything else.

Yeah, no, 100%. And I was talking to an agency owner the other day, and that's exactly what I was struggling with, was every time I get someone trained up and they're actually doing great work, they tend to leave. And it's not because the work's not challenging. It's not because the work's not purposeful. It's none of that. As they're doing their exit interviews, it's literally, I love you. I love the business. I love working with my clients, but I just need to take that next step in my career. And I think as April pointed out in the chat, it's about trying to figure out how you can transition people from doers into strategic leaders. But doing that in a cost-effective way as well. Blair makes a really interesting point as well. Benefits are huge. Obviously, that's one of the biggest challenges, especially as a small business, to be able to offer benefits in a cost-effective way. And profit sharing, I've never come across that a lot, Blair. If you're willing to share, I'd love to hear about your experiences, man. What are you hearing from your employees? Yeah, actually, I don't know if my A-player will even watch this video, but he just gave me an extended notice because he has a young family and he got offered full healthcare benefits, 401(k) and everything. And he really is. So I'm navigating getting insurance for these guys. And my problem is all my US-based employees are in a different state. So it's really troublesome. We're probably going to the health arrangement account where you can fund someone's premiums and they don't pay taxes on it. As an alternative. But yeah, so that was a new one for me. And I've tried to hire two more US-based people and they really do want 401(k), clear bonus structure. And one SEO guy who's very knowledgeable wanted profit sharing right up front. That's a challenging conversation to have. And I don't think there's a simple answer. Obviously that's going to be a case-by-case dependency. There are going to be some circumstances where profit sharing or equity participation is an option, but that just adds a level of complexity and obviously reduces your ownership as well. So key takeaway, obviously scaling. So we have to talk about scaling and it's just a word that gets thrown around so much. What does it actually mean? To me, it means being able to absorb more revenue without necessarily incurring more cost. So that may mean relying upon productivity gains. It may rely upon efficiency gains. It may rely on other solutions. But right now, obviously AI is the default solution that everyone uses. And we're going to talk about that right now. AI. Now again, we can't have a conversation without talking about AI. And this was reflected in the data, specifically the chart on the left. So the 72% of respondents identified AI as the number one macro industry trend. To be honest, that's even lower than I was expecting. I would've thought that would be much higher, especially with all the hype, the constant conversations about it. Again, the blog posts, the articles, the news reports, et cetera. But it's still the sort of number one trend. And obviously with the recent developments in some of the models, people are definitely viewing this as being something really important. What's really telling to me though, is the chart on the right, which is that everyone considers AI to be important. Very few people are actually making it an operational priority. And that's exactly the comment that Alex just made as well. I'm sure many of you are thinking to themselves, yeah, that's not true for me. I am making AI as a massive operational priority. Priority, but I think the real challenge, and this is where the disconnect comes in, is that to identify the specific things that you are doing to make it a top business priority. And so what I mean by that is that I'm sure that many of you have an AI project. Hey, we're moving our content generation to this. We're changing our workflow to do this. I think those are really good examples. Of how people are thinking about AI. And that certainly comes in, in reflecting the data you'll see in the next slide. But I don't think too many agencies are saying, hey, in terms of business priorities, revenue growth is number one, profitability is number two, AI is number three. Like every monthly meeting, every week, every quarter, we're going to be talking about our AI initiatives. I don't think many agencies are thinking about AI in that regard, and that's what this has been, what this has reflected. Now the question becomes, should we? And I think the answer is yes. I think the hard part is that we just don't know how to do it. We all talk about AI, but the reality is I think agency owners are having a lot of trouble actually figuring out how to use AI. Couple of examples. Agency owners, we don't know how to figure out which of the tools we want to use and how to integrate them. And that's, I think, a function of just being overwhelmed with the sheer quantity of tools available. It feels every day a new tool comes out. Shoot, Claude's dropping a new feature every couple of weeks. So when you're seeing iterations of tools at that velocity, it's really hard to wrap your way around what do I do and how do I actually integrate this? So I think that's one of the biggest reasons why people don't make it a big strategic priority. I think the other one, and this is I think near and dear to all of us in the agency world, is we're constantly trying to balance that level of automation, streamlining, sort of factory automation, so to speak, with that creativity. We never want to deliver a solution, whether it be content, whether it be design, whether it be a website, whether it be a branding, whatever it is, we never want to deliver a solution to a client that feels like it's been made by AI and not with passion from that human. And that's a real struggle that most of us have. And so now I think what we're seeing is that translates into confusion for the agency owner. I know I need to be doing something with AI, but I don't know how to do it. And the stat on the right-hand side is also telling, which is I'm not even going to hire anyone that can help me navigate. Through that process. And that one's not surprising because the moment you start thinking about an AI engineer or a prompt engineer or anyone like that, you can imagine the sort of big price tags that are going to come along with that. And so it becomes very hard for a business owner to do. And look, candidly, I'll be transparent, we at Herringbone, we struggled with that recently as well. We weren't hiring anyone. We knew we had to do AI. We had projects here and there. But we didn't actually have anyone focused around AI. We finally made the decision to specifically develop and implement an AI strategy by hiring 2 people whose sole job is just to do AI. We obviously have the benefit of being quite large and having the ability to amortize any AI investments we make across 6 different portfolio companies, 15 agencies. But I do fully sympathize with some of the challenges that the average agency owner has in light of this AI challenge. I'm going to pause here. This is your opportunity to hate or love on AI. Love to hear, a couple of people talked in the chat about what they're doing. What are some of the challenges or opportunities that you guys have seen in implementing AI? Is it something that you consider to be a massively important strategic initiative, or is it like Ashton said, hackathon style where we just deploy AI here on a project basis? Who's got sort of strategy versus projects with respect to AI? Be curious.

Yeah, guys, raise your hand if you want to speak to this. I would say as a community, we are looking at it as like we have to make a big shift and become AI-powered growth partners for our clients. And making AI the center of that. And that's going to require the, in a lot of cases, since we don't have the financial resources to go out and hire trained engineers, as the entrepreneur, be the innovator of how we're using these tools and being part of a community like this and being able to share best practices definitely helps to shortcut some of that learning. Jay, I see you have your hand raised. Let's go to you first.

Thanks, Josh and Nazem. Great to see you.

Hi, Dan.

Thanks for sharing. We've made some strides with building AI tools to provide an asset to the client. So like we built an AI tool that listens to calls and coaches the intake team. And so it does a pretty great job. We modeled it after a bunch of the top intake coaches and we had a bunch of content that we've developed over the years. And podcasts and webinars, and they've spoken on our stage. So we read all that into creating a great intake coach. And then we give feedback to our clients and we can do it en masse, like for their whole intake team or for the individual. And it gives them what they did right, what they did wrong, even recommends scripting and changes. So it's become a great asset to help us convert more cases. But I also want to turn it around to you and say, you've got a couple of people building AI. What are you guys building for your portfolio?

Good question.

Yeah, great question, Jay. Way to flip the script on me. Thank you. Look, I think we're thinking about AI in probably very similar formats to the way you're thinking about it, which is there's a piece which is what I describe as being internally facing. So looking at all the workflows that individual people are doing. Josh, I love your comment on the chat. Which is map out the systems first, map out those workflows, and then figure out how AI can sit on top of that versus using AI as a crutch or put AI onto an already broken process. That's one of the biggest mistakes we see is where people expect AI to fix something that's broken. All AI will do is make that broken process go faster, and that can be very challenging. To your point, Jay, we're definitely looking at ways that we can deploy AI to make things go faster on any individual system or workflow or process. Call that the project piece. The second thing that we're doing is where's the puck moving with respect to AI? And I think there are two parts to that. Number one is what are some of the changes to end consumer behavior? What's going to happen to Google search volumes? What's happening with AI search results? We're trying to understand what's going to happen in the future. We haven't seen a huge impact yet, especially given that we're focused on the local space. I think the local space is a little bit more insulated from AI right now, but we're starting to think about what happens in the future. So there's one part that we're looking at. And then the second part about it, what we're looking at is what are our clients going to be wanting? And I'm sure many of you have already heard from your clients that We want to rank in the AI search results. And so then you've got a whole bunch of people out there selling GEO or AI-enabled SEO. We can debate whether that's a real product or not, but that's certainly what clients are being told to purchase. So that's the three-pronged approach we're taking is let's use AI to streamline some of our workflows, get that scaling that we talked about. Number one, number two, think about what clients' needs are. And then number 3, what are some of the trends potentially going to evolve with respect to the end consumer behavior as well? Krish, I think you had your hand up as well.

So yeah, I'll just proceed with what you just said, which is what is your client wanting? So I'll break it in 2 phases. One is just something that we did because our clients asked it. And the second thing is the biggest challenge that we are facing. One of our clients, he said, I just want you to create an infrastructure in which you are doing posting for me on my social medias. Every day I need a post going there and I need to be all AI. So it's basically the post getting generated, the creative, we have selected a theme and then it gets automatically generated and then it gets automatically scheduled to go to his social media platforms. We're not too sure how it's going to be turning out, but I think What he's relying on is if you engage with your social media platforms every day, something good is going to happen. So we're also waiting and watching. It's been 7 days or so since this has been implemented and it's out there. It's running. That was the first thing we implemented, just replying to your, what is your client wanting thing? Second, what we needed is we wanted our PPC, which is Google Ads guy, to check his ads. So we created a platform in which he's able to test his ads, see what is the reach using the studio and all those options. So that is something we created for for our internal team. And the third thing is we do a lot of LinkedIn stuff. So we check the virality of our post using something that we call LinkedIn Virality Checker. So these are the three things, solutions that we've created, couple of them for ourselves and one of them for our clients. The biggest challenge, what you mentioned, how agencies are still going to be important, is implementing is easy, but creating the infrastructure is the biggest part where the actual credits, prompting, those kinds of things go, the technical know-hows. I think that's very important and that's why they're still going to be needing us even in this ever-changing sphere of digital marketing.

Yeah, I agree with all that they just said. Look, this is the next evolution of agencies. If you go back from the good old days of Mad Men in New York in the '50s and '60s, what an agency does today compared to what was being done then has evolved a lot. Agencies always evolve. The need for marketing does not. And so we'll just see this as being yet another evolution. And obviously we'll need to evolve and adapt, but it's not like our clients are going to sit there and suddenly run campaigns by themselves. Our clients are doctors, lawyers, dentists, and tradespeople. They're not going to sit there and talk to Claude to run a marketing campaign. That, that's just the reality of it. We all know, and it's not going to happen anytime soon. Okay. Yeah.

And my perspective on that is at the end of the day, it's about problem solving, right? And as marketers, as entrepreneurs, we're looking at the landscape. We're trying to figure out what the problem that we can help solve is. And the toolset, whether it's SEO, websites, AI automation, will evolve as the economy and business marketplace continues to evolve.

Let's get back into the results. So this was a really interesting one. The key takeaway for me is the point down the bottom, and that is that most agency owners are seeing AI as a way to protect margins. Maybe that's the answer to the scaling question that we talked about earlier, but there's not been a lot of forward thinking about how to use AI to offer some of those new services or new products. To clients. Exactly what we were just talking about. And I think this is getting reflected in the data. If you think about what the data is showing is that this is how AI is being used by agencies. It's content creation and ideation. It's workflow optimization and automation. Reporting. It's a huge one, obviously. And then 64% of them said, as a result of my AI initiatives, I've seen efficiency. I've seen increased profitability. You don't see a lot of agency owners talk about, as a result of AI, I've seen revenue grow. I've seen new clients come on board. I've seen my average contract values going up. So for now, I think everyone, similar to the conversation we just had, everyone's thinking about and framing AI as just the thing that they will help achieve their, to help them overcome that scaling issue. And help improve their margins. I also do firmly believe that over the next 6 to 12 months, we'll start to see that transition where people start to think about AI as an opportunity to generate higher revenue as well. Monica, a, a Gentic org chart. I am not familiar with that, so I'd love for you to chime in there. What are you referring to there?

I think it's what Josh Wheeler said there. He's building an agent. Josh, can you unmute for a second and talk through what you're doing there?

Yeah, basically whenever we go through and we're starting to work with a company as a growth partner, the very first thing that we want to do is map out where they're at and go ahead and start helping them understand how to implement some of these things. So most of the time it's going to be a hybrid role first. It's what agents can be put in place to support your existing employees. And then you can say, okay, now how do we wean off people into doing more higher efficiency roles? Now that's what we're doing internally as well. So as a PPC, I primarily do that part of it, which means I need my ad pilot to run the system. So they're approving things, they're working through some of the initial creative briefs that are going into the system. So we basically treat it as an org chart, and then we just start mapping out where those things go, and it helps us build that infrastructure. Okay, what else is needed beyond just the basic cloud or whatever? It's okay, what data layers do we need? What memory do we need, etc.? So it's been super helpful to do that first. And then it tells me how we need to prioritize based on either cost or, oh, I'm going to need new ad managers in place. So what part can we put here to give capacity to our existing staff without hiring?

That's so cool, Josh. Thank you for sharing. That's a really interesting idea that I've not really thought about, is literally having an org chart with people and agents and showing the interplay between the two of them. And as you map out those processes, also then layering on both people and agents to show how they work collectively together. That's a really interesting idea. Thanks for sharing. Okay, moving on. So look, to me, the key insight is quite well summarized here. I think it's absolutely important to think about what clients are asking for, but in my opinion, and based on the data, I think the reality is that there isn't a true AI offering yet that clients really want. They might think they want it, but they don't really want it yet. Now again, that may change over the coming 6 to 12 months because who knows what's going to happen, but I don't think I'm seeing it in the market yet. And so instead, I think the folks who are thinking internally about using AI to drive that scalable revenue growth by implementing it in workflows and using it to offset increasing labor costs, that's certainly coming out of the data, and I'm sure what I'm hearing from the folks who have spoken already. Before we move on to the next topic, any sort of final thoughts or comments or questions around AI?

Guys, drop your question in the chat or raise your hand. It would come to you real quick with any questions or comments.

Jay, thank you for putting me on the spot early, but I'm more than happy to share my experiences about what we're doing at Herringbone as well.

In the last couple of weeks, I've essentially mapped out how our DBM AI operating system is going to work with all the pieces and components. And essentially Claude is going to be the system architect, but I'm still a little stuck on whether we should continue to use ChatGPT as the thinker and then put things in Claude to build things. So I'd like to know your feedback on that.

Let her know what you guys think in the chat. Yeah, I would say if you can keep it all in Claude, I don't think it's necessary to use both, but that's just my personal opinion at the moment. Let us know in the chat what you guys think, if you've got ideas for April on that question.

Yeah, I've just been using— I missed what you said, cause I'm sorry, I'm having sound issues, but I've been using the $200 version of ChatGPT for 2 years personally, and it knows everything about me and the business and stuff like that. Obviously I'm not going to open that up for the rest of the team because there's a lot of personal things in there that are only on a leadership level. So obviously I'm more comfortable with ChatGPT because of that. And I've been prompting ChatGPT for what I want to give me a prompt to put into Claude to build what I need. So I know it's overly complicated, but I wanted to just get people's feedback.

If you look at the chat there, pretty much everybody's saying choose one platform and go with it. You can take what you've already put into ChatGPT and put it into Claude if you're going to go down that path. Most people are leaning into Claude as the go-to in the community anyways for the immediate term.

Yeah. And the other thing that I'll add, April, and this is not intended to scare you, but I think that you see an arms race between Claude and Gemini and ChatGPT. That one day I think back to 6 months ago, ChatGPT was superior and then Claude overstepped past them very quickly. I can easily imagine that, that the leader is going to constantly change. And I think we're seeing it from lots of other comments, but Josh articulated it as well as different tools will be better for different use cases as well. So it adds complexity when you're using different tools. But I think that's one of the strategies that you could adopt. You see a lot of other people in the chat sort of say, look, that's all too hard for simplicity. Just go with one, recognizing it's going to be stronger in some regards and weaker in others. And that's just part of it. So you're trading off complexity for sophistication.

It's a great question, April.

Alrighty, let's move on to the next topic, which is obviously one that's near and dear to my heart. I think the statistic on the left blew me away. It's saying basically almost 90% of agencies have been approached by an investor about in the last 12 months. Yeah, it'll make my job a little bit harder when everyone's been talked to already. But I think that is again, validation that if you've been receiving those emails, if you've been receiving those calls, you're not alone. Not loans. And I often get asked what's driving this, like why now? And the reality is that there's still a ton of capital that needs to be deployed, that dry powder that you may have heard about. And I don't think I mentioned this when I was up on stage last time, Joshua, I'll have to repeat it, is think about this sort of mind-blowing stat, is that there is $2.5 trillion invested with private equity. So $2.5 trillion have been given to private equity firms for them to go and spend. $1.5 trillion, that's trillion with a T, has still yet to be deployed. Wow. So there's a bunch of folks like myself and also a lot of other folks in other private equity firms that are sitting there going, gosh, we really need to make some strong investments here because if we don't, the people that gain this money, they're going to start to give us grief. And so that's why I think you're seeing the volume of emails and calls go up. And if you think about what the average agency looks like, there's a lot of characteristics that the average agency has that PE love, which is a very large addressable market. There's recurring revenue, there's good profit margins, there's some level of recession-proof like all the things that make your business attractive to you are what's making it attractive to private equity as well. Another part of me says that's actually not that surprising either. And that's really why we're seeing so much activity over the last 12 to 24 months. What was very interesting to me though, was the stat on the right. Is most, almost everyone out there is open to having a conversation about deals. And that's true on the buy side and the sell side. I've been at this particular role in the M&A world of agencies for about 6 or 7 years now. That's probably the highest number that I've seen whereby you're getting a lot of people inbounding, but you've got a lot of agency owners who are saying, you know what, I'll take that call. Or if they're on the buy side, maybe I'll make that call. And have that conversation. And so to me, that is a really interesting statement that everyone is now at least contemplating what buy or sell might look like. And I think that's just a reflection of the frothiness in the market driven by some of those investors we talked about. I think everyone's just curious about what does this mean? It's never been part— when you start map out what your 3-year plan is, Most up until recently, M&A has not been part of one of those vectors. And now I think with this much noise, people are starting to say buy or sell as being one of the potential outcomes. And so what's driving that interest in having that conversation? And I think there are 3 main factors. Number 1 is, well, the left, growth and scale. And so I think, again, we've talked about growth from the outset of the presentation. What better way to grow than to go and buy somebody? If you're sitting at $500K of EBITDA, you see another guy down the road that's doing $250K, $500K plus $250K, $750K. That feels like a pretty easy and simple way to get 25% larger or 50% larger. So I think there's definitely on the scaling side. You've heard, you've seen, you've experienced that the larger you get, the more scaled you can become. So maybe if I go and buy somebody, I can force myself up that scaling curve and they can help you do that. And it doesn't surprise me that growth and scale is number one factors as to why people are contemplating doing a buy or a sell-side transaction. Another, the other two drivers on the right-hand side, Honestly, these are a little bit lower than I had initially thought, but access to capital. I think most agency owners, when you ask them what was on their wishlist and the answer oftentimes, I just wish I had a little bit more money to invest in my people, to pay them a little bit better, to go and hire that really stellar account manager or that SEO person to invest in AI. And so it's actually surprising to me that only 42% put access to capital as being a driving force. Around acquisitions, clearly a little bit more on the sell side than on the buy side. But even on the sell side, if I sell to a larger agency, I'll suddenly have access to a deeper pocketbook to enable me to do some of the things that I want to do. And then the last one is really surprising to me is how low it is because most of the agency owners I speak with, and I suspect many of the folks in this room as well, the single biggest asset in your net worth is your agency. That's all paper wealth. That's a piece of paper that has your name on it. And so I think as people reach various stages in their life, maybe they just get married, maybe they have kids who are younger, maybe their kids are older, maybe they start to get to retirement. There's definitely rationale for wanting to say, look, I really want to take this asset, especially in times where there's some risk. And uncertainty about what the future holds, now's the time for me to potentially take some of that paper wealth and convert that into real dollars and cents into the bank account. And so that's definitely part of the motivator as to why people want to specifically sell to another player. But it's really intriguing that there's 70% of founders, they're cautiously optimistic. Obviously an infinite number of things have to be known, who the buyer is, what the terms, what the valuations, what the future holds, what my role is, et cetera. But just the fact that 70% of you are really interested/excited about what an acquisition or a disposition might mean, really interesting to me. So the key insight, and then I'm going to stop talking for a bit because I want to get some questions. The thing that I always tell agency owners, whether you're big, small, or medium, is two really important lessons. Number one, Josh, I hopefully will reinforce what you preach as well, is continue to focus on building and operating the agency as if you're not selling it, because the things that a buyer will care about, growth, retention, profitability, team, leadership, standing operating procedures, technology, AI deployment, all those things that a buyer cares about are the things that you as an owner should be focused on and care about. Where I see agency get into trouble is where they start to suddenly change the way they're doing things just to make them be ready for sale, because inevitably when they do that, they forget about the core principles of the business. And so I strongly encourage everyone to listen to everything Joshua and his team preach of just focus on the fundamentals of your agency, get those right, focus on those, acquisition, good things will happen as a result of that. So that's number one. Number two, and this is a little bit hard, so you might need to use a little bit of judgment here. But if you do get approached by an investor via a phone call, an email, have the conversation, take the call, respond to the email. And I recognize fully that it's not possible to take all the calls, but certainly take a selection of them. And the reason being is that I want all of you to get much more educated about what the buy-sell process looks like. I want you to understand the valuations that are being offered. I want you to understand the different models that different buyers have. Harry Bone has a very different approach to many other buyers, and you need to understand what those different models are. I want you to think about the answers to the questions they're going to ask. Things like, what are your valuation expectations? What do you want to do post-close? Those are things that come teasing out of those conversations. One of the things I used to do when I managed the younger teams was always, if you are looking for a new job, do about 5 interviews with firms that you don't want to work for so that when you get the interview for the firm that you do, you have got your pitch down. You know the questions, you know the answers. And so I strongly encourage you to do the same thing. Even if you're not interested in selling now, take the call because you'll learn a lot. And then quite selfishly for me, my favorite seller is one that's sophisticated and knowledgeable because it makes the transaction itself much easier. And it also ultimately significantly increases the likelihood of a successful outcome because we're both making an informed decision and that's going to lead to a much, much better outcome for everyone involved. So again, recognize you can't do everyone. But certainly dabble in it, take a couple of calls here and there just to understand what's going on. Okay. That's everything I wanted to talk about coming out of the survey. At this point, love to open up to any other questions that most people might have about the findings of the survey, growth, AI, M&A, any other topics related to mergers and acquisitions, or any questions about Herringbone or anything else. I'm an open book and happy to talk about whatever you would like to talk about.

Great conversation. Let's open up for questions. It could be a round—

one, one last thing, John. I'll make that presentation available to you, Josh, so it can be available to all your members as well.

Thank you very much. I appreciate that. And Azim, for the people that may be in that place where they're like, hey, I might want to sell my agency or at least get an idea, what would you guys be looking for and how would they connect with you on that?

Yeah, great, great question. I stopped sharing too soon. So this, yep, there is, there's my contact information.

Yeah, let's leave that on while we answer Q&A. I think that's perfect.

Yeah. Clara on the call as well. She is my right-hand person. I can't do my job without her. So thank you, Clara. Just feel free to drop me a note. I'm very active on LinkedIn as well. So feel free to read and/or comment and/or post on any of the posts I make. To answer your question specifically, Josh, what we're very, at Herringbone, what we're very focusing on, digital marketing agencies that serve lawyers, doctors, dentists, and home services. So those are our sort of main 4 verticals. We're looking for agencies that are a little bit scaled. So typically the cutoff would be around $1 million of EBITDA on the last 12 months. We can definitely scale up, a little harder for us to go down lower than that, but definitely if you're around that million dollar mark, plus minus, give me a call. I also, as you can hopefully appreciate, I love talking about this stuff. So if anyone, even if they're not necessarily a great candidate, but if you want to have a conversation about M&A or anything, I love talking about this stuff all day, every day. So happy for you to reach out and just set up some time to chat. Super good.

So those industries, million-dollar EBITDA, that means profit. That's not top-line revenue. That's your business produces that in profit. You'd be a good fit for Azim and their team. But it sounds like Azim is open to have conversations with you either way. There's a great question here from Blair. He's saying, what's the multiple used to buy an agency? Top line revenue, et cetera. Can you speak to that high level for him?

Yeah, there's no answer. Okay. It really depends. And I say that, but it really depends. But let me give you a range because that might be helpful. An agency that's on the smaller side, let's call it $250,000 to $500,000 of profit, like Joshua mentioned before, that might be not necessarily focused on a specific vertical, that might not be growing that much, that might be really dependent upon the founder versus having that leadership team in place. They're probably going to be trading around 2.5 to 3.5 times EBITDA. So it takes them back What Blair is referring to is the multiple. When we are doing valuations, what we are typically focused on is we look at the profitability, that EBITDA number, and then most valuations, especially when you're doing quick back of envelope calculations, you are going to multiply it by this thing called a multiple. So if you are on the smaller side, like I just described, 2.5 to 3.5, is we look at your EBITDA, your profit, we'd multiply that by 2.5 or 3.5, and we'd say that's the value of your business. At the other extreme, there's, I've seen agencies trade at 7 or 8 or even 9 times. It's possible, but I caution you that the laundry list of things that you must be able to demonstrate is pretty long and extensive. So it includes things like size. You need to be probably in that sort of $4 to $5 million of EBITDA profit, not top line, but EBITDA profit. You need to have strong growth. You need to have very strong retention. You need to be verticalized. You need to have good industry reputation. You need to have good technology. You need to have good AI deployment. You need to have a strong management team. The list is very long. It's not to suggest that it's out of the realms because I have seen agency trade at that sort of premium, but recognize that's pretty rarefied air and only available to a pretty select number of agencies out there. As Alec, you're exactly right. One of the things that's really important in evaluating an agency is the level of founder dependence. And the easiest illustration of that is think about your go-to-market or your sales. If you as the founder are taking all the sales calls and/or closing all the sales calls, I as a buyer am going to be less excited about that because it means that there's no sustainable sales engine or growth engine. Suddenly that sales pipeline just dries up overnight versus an agency that has been coached and taught by the agency owner to have a sales engine that works independent of him, that gets a little more interesting to me because it shows there's a level of sustainability and certainty associated with that. So that's just one example of when we talk about founder dependence.

Yeah, I think what's interesting here is regardless of if you want to sell right now, or if you think you want to sell 5 years down the track, or if that's even on the horizon, as the company becomes more attractive to a buyer, whether that's PE or a private buyer or strategic buyer, it becomes a funner business to run.

Right?

And that's what we're trying to teach all of you guys to do at 7 Figure Agency is let's build a business that's positioned as the go-to expert in the space that has consistent revenue and put the systems, procedure, and team in place so you're not physically doing it yourself. Right? You've got a leadership team, you've got sales, you've got account management. And as that happens, you're a lot more attractive and you can get a much higher multiple for the business.

But to your point, Josh, it's also a little bit fun. Agency. I spoke with an agency owner yesterday and he had some success in achieving that model. And he said, right now I work 20-ish hours a week. And the things that I do, think about big picture strategic initiatives. I spend a lot of time coaching and doing leadership with the team, something that he loved doing. He loves talking to some of his bigger clients. On an as-need basis because he wants to talk to them. So to your point, Josh, as you start to build some of that infrastructure in place, the things that you as an owner get to spend time on are the things that you enjoy the most.

Yeah. Great stuff. I want to be respectful of your time, Azem. Do we have a hard stop?

I'm good for a little bit longer. Okay.

So if you've got one last burning question, you want to raise your hand or drop it into the chat. Feel free to ask those questions while we still got Azim before we have to wrap things up here today. Not seeing any questions. Really appreciate you coming on, Sherry. I think this has been really valuable and eye-opening. Any last comments or statements before we wrap things up today?

I really valued the opportunity to be here, Josh. Thank you. And thank you to everyone for being really engaged. Hopefully you guys all learned something about it. And again, if you have any other follow-up questions, feel free just to reach out and definitely follow me on LinkedIn.

Amazing. Good to know, guys, when your agency does get to that million-dollar profit place and you've got that stuff in place, there is an active buyer that's interested in acquiring your company and will do it well and will treat your brand and your team with respect, which I think Harry Bone is doing at a world-class level.

Very kind, Josh. We definitely live up to that.

Amazing. All right. I think we will wrap it there because I don't see any questions coming in. Thanks again so much.

Claire, thanks for your support.

And we'll see everybody again real soon.

Take care.