Free tool · Hiring an agency
Agency ROI and exit value
Before you hire anyone, including us: how much growth does the fee need, when does it pay back, and what is the extra profit worth when you come to sell?
- Payback month
- Exit value
- No sign-up
Reading your figures…
- Extra profit after the fee, per month once growth is in place
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- Growth needed to cover the fee
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- Profit back per £1 of fee
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- Paid back by
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- Added to the value of the business at a sale
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Arithmetic on your inputs, not a forecast or a promise of results. Growth is never guaranteed, and a buyer values a business on more than profit: how dependent it is on one channel, on advertising and on its founder all move the multiple. A broker can tell you the multiple for your category.
Test the growth figure with us.
The expected growth is the number that decides everything above. In a Profit Audit we look at your accounts and tell you honestly what we think is achievable, and what is not.
How it works
The only number an agency fee has to beat
An agency fee is an investment with a simple test: the extra profit it produces has to be bigger than the fee. Everything in this calculator follows from that one comparison.
Extra profit after the fee, per month
Net gain = sales × growth × margin on extra sales − fee
Once the growth is fully in place.
Growth needed to cover the fee
Break-even growth = fee ÷ (sales × margin on extra sales)
The first number to test against what an agency is promising you.
Value added at a sale
Exit value added = net gain × 12 × sale multiple
Uses the multiple you enter; it is an illustration, not a valuation.
A worked example
A brand selling £80,000 a month keeps 18p of each extra £1 of sales after costs and advertising, and is quoted £2,500 a month by an agency. The fee is covered at £2,500 ÷ (£80,000 × 18%) = 17.4% growth. At 20% growth, once it is fully in place, the extra profit is £80,000 × 20% × 18% = £2,880 a month, leaving £380 a month after the fee. That is a thin return: with growth building over four months, the cost of the ramp-up is only recovered in month 12. The same agency at 40% growth leaves £3,260 a month, pays back in month 3, and at a 3.5× multiple adds £136,920 to what a buyer might pay.
The lesson is not that agencies are good or bad value. It is that the growth figure decides everything, so it is the one to question hardest, and the one a good agency should be willing to put in writing.
What the old calculator got wrong
The ROI calculator on our previous site multiplied by a fixed four times yearly profit without saying so, showed losses as positive numbers and could not take a fee of zero. This version shows its formulas, lets you set the multiple and ramps growth realistically, so the answer is one you can defend to a finance director.
Questions
About this tool.
What margin should I use for the extra sales?
The profit you keep on each additional £1 of sales after cost of goods, Amazon’s referral and fulfilment fees, advertising and VAT. It is usually lower than your gross margin because growth often needs more advertising. If you are unsure, run the Profit X-Ray first: its profit after advertising, divided by sales, is a sensible starting point.
How is the exit value worked out?
Extra yearly profit after the fee, multiplied by the sale multiple you enter. Buyers usually value an owner-run ecommerce business at a multiple of its yearly profit, and the multiple moves with growth, channel risk and how much the business depends on its founder. The calculator does not assume a multiple for you; ask a broker for the range in your category.
Why does the payback month differ from the monthly result?
Because growth takes time to build. The calculator ramps the growth evenly over the months you choose, while the fee is paid in full from month one. The early months therefore run at a loss that the later months have to recover.
Is this how you price your own work?
It is how we suggest any founder tests any agency, including us. If the growth needed to cover the fee looks unrealistic for your account, the agency is the wrong choice, whatever its case studies say.
The Profit Audit
Want a senior team to read your numbers with you?
One call with Robert Prime and the team. We go through your accounts product by product and show you the changes most likely to add net profit.