Taking over an advertising agency: how to evaluate the client portfolio?

The key indicators of a client portfolio in an advertising agency

The analysis of a client portfolio in an advertising agency begins with four essential metrics. The number of active clients gives an initial indication of the size of the base. The concentration of turnover reveals dependencies: if 80% of revenue comes from 3-4 clients, the risk is high.

The average age of client relationships indicates the stability of the portfolio. Collaborations of 5 years or more demonstrate lasting satisfaction. The annual recurrence rate measures loyalty: a rate above 85% is a positive signal.

These figures directly determine the solidity of the portfolio and influence the valuation of the agency. To deepen the overall evaluation, consult our guide on how to value a local communications agency.

Analysing the typology and diversification of clients

The split between B2B and B2C clients influences revenue stability. B2B clients generally offer longer contracts and more predictable budgets. Also examine sector diversification: an agency dependent on a single sector (tourism, retail) suffers economic crises head-on.

Client size also matters. Local SMEs pay less but remain loyal. Large companies generate significant volumes but can change agencies quickly. Public administrations offer stability but impose heavy processes.

Identify the most profitable segments and evaluate concentration risks. A balanced portfolio across sectors and client sizes reduces vulnerability.

Evaluating the quality and duration of contracts

The contractual nature of the portfolio determines revenue predictability. Ask the seller for current contracts with their expiry dates and renewal conditions. This analysis reveals the share of revenue secured in the medium term.

Distinguish formal commitments (signed contracts) from informal commercial relationships. Advertising agencies often operate on trust, but written contracts provide better protection during a takeover. Also verify specific clauses that could complicate the transition.

Recurring contracts vs one-off mandates

Predictable revenues come from annual contracts or monthly retainers. These commitments guarantee stable cash flow and facilitate planning. Calculate precisely the share of revenue secured by these recurring contracts.

One-off projects (campaigns, events) generate revenue peaks but guarantee no continuity. An agency with 60% or more of recurring revenues presents fewer risks. Recurrence is a major valuation factor as it reduces uncertainty.

For a similar approach in another sector, consult our article on evaluating maintenance contracts in IT.

Termination clauses and notice periods

Carefully examine the exit conditions of each contract. A one-month notice period allows clients to leave quickly after the takeover. Notice periods of three to six months offer more security to stabilise relationships.

Tacit renewal clauses protect the agency: the contract renews automatically unless explicitly terminated. Also identify possibilities of early termination linked to a change of owner. Some contracts include exit clauses in the event of a transfer.

These elements help you identify fragile accounts and anticipate risks of rupture in the first months post-takeover.

Measuring the transferability of client relationships

The change of owner represents a critical moment for the client portfolio. Some clients follow the seller out of personal loyalty, others remain attached to the agency itself. This distinction determines the risk of departure post-takeover.

Analyse the history of each relationship: who manages the account on a daily basis? Does the seller intervene directly or are the teams autonomous? The more institutionalised the relationships, the lower the risk of loss during the transfer.

Personal relationships vs institutional relationships

Accounts managed directly by the seller present a high risk of departure. If the founder maintains strong personal ties with client decision-makers, the transition becomes delicate. Identify these strategic accounts from the due diligence stage.

Institutional relationships rest on the agency as a whole: established processes, dedicated teams, track record of results. These accounts are generally more stable. Plan transition meetings with key clients to introduce yourself and provide reassurance before finalising the takeover.

Role of creative teams in retention

Creative talents and project managers constitute the direct link with clients. Their departure can lead to the loss of strategic accounts. Evaluate team stability: seniority, satisfaction, working conditions.

Identify the key employees who manage the largest budgets. Plan retention measures from the takeover onwards: recognition, development prospects, maintaining conditions. High turnover in the six months following the transfer weakens the entire portfolio.

For concrete retention strategies, consult our guide on how to retain key employees after a takeover.

Verifying the actual profitability of each account

Turnover alone is not sufficient to evaluate a client portfolio. Some accounts generate significant volumes but consume enormous resources. Client-by-client profitability analysis reveals the actual value of the portfolio.

This approach identifies loss-making accounts that weigh on the overall margin. It also allows you to spot opportunities for tariff renegotiation or process reorganisation to improve profitability post-takeover.

Time spent vs fees invoiced

Request detailed time records for the last 12 to 24 months. Compare the time actually spent with the fees invoiced for each client. This calculation reveals the effective hourly rate per account.

A client who pays CHF 50,000 per year but requires 1,000 hours generates an hourly rate of CHF 50. If the agency's hourly cost is CHF 80, this account is loss-making. Identify these anomalies to make informed decisions: renegotiation, optimisation or disengagement.

Hidden costs and time-consuming accounts

Some clients demand multiple revisions, frequent meetings or tight deadlines that mobilise teams disproportionately. These time-consuming accounts generate little margin despite decent revenue.

Spot these situations by cross-referencing time data and team feedback. Evaluate the possibilities of tariff renegotiation after the takeover or progressive disengagement if the relationship is not viable. Some historical accounts may be maintained out of habit whilst they weigh on overall profitability.

The essential documents to request from the seller

Due diligence relies on concrete documents. Require the complete list of clients with annual turnover for the last three years. Request copies of current contracts with their conditions and expiry dates.

The monthly invoicing history reveals seasonality and revenue variations. The annual retention rate measures loyalty. Reports from the latest client reviews show the level of satisfaction. The organisational chart with account managers identifies key people.

Have this data validated by a transfer expert. The Leez partner network can support you. You can also consult similar agencies available on the platform for comparison.

Evaluating the client portfolio of an advertising agency constitutes the most critical stage of your takeover. The diversification of accounts, the quality of contracts, their duration and recurrence directly determine the sustainability of the business. Beyond the figures, the transferability of client relationships represents a major issue: an agency resting on the seller's personal connections presents a much higher risk than a structure where relationships are institutionalised.

The analysis of the actual profitability of each account will allow you to identify strategic clients and time-consuming accounts that destroy value. Systematically request contractual documents, invoicing histories and termination clauses to objectively evaluate the risks.

Are you considering taking over an advertising agency? Discover the agencies for sale on Leez and connect directly with qualified sellers. Our network of experts can support you in auditing and valuing the client portfolio.