Spencer Gallagher: What Makes a Business Worth Buying, According to the Man Who Sells Them

Spencer Gallagher was working out of a shed in his mum's back garden, £5,000 to his name, when he did the maths on how long he could survive. Three redundancies in a year had taken the decision out of his hands. Five thousand pounds, he worked out, would cover three months of living and working before the money ran out. He was not building an asset. He was trying to make money any way he could.

Just over a decade later, at 37, he sold the business he had started from that shed. By then it had grown into the eighth-largest digital agency in the country, and along the way he had put Liverpool Football Club and Andy Murray on the internet. Today he does not run agencies. He sells them, buys them and merges them for other people, with a network of around 600 buyers he has spent years building relationships with. Somewhere in that journey, the shift happened: from a man trying to make the rent to a man who can look at almost any business and tell you, within a conversation or two, roughly what it is worth and exactly why.

That shift, more than any single tactic, is the argument Gallagher makes across an hour of conversation on the ActionCOACH Business Growth Podcast. Most owners treat their business as a job they happen to own. The ones who end up with something valuable treat it as an asset, understand precisely what makes that particular type of asset valuable, and build towards it deliberately, whether or not they ever intend to sell.

Build Something Someone Wants To Buy, Not Something You Hope To Sell

Gallagher was told, once, about a man who turned down £40 million for his business and sold it two years later for £200 million. The line that stuck with him afterwards was simple: don't build a business to sell, build a business that someone wants to buy. It sounds like a distinction without a difference until you sit with it. A business built to sell is optimised for the moment of the transaction. A business built to be bought is optimised for someone else's confidence, long before any conversation about price begins.

Gallagher's own version of this is a house. Most people own their home with no plan to sell it, yet they still maintain it, still turn the kitchen and dining room into an open-plan kitchen diner, because that is where value sits right now, whether or not moving is on the horizon. A business works the same way. McDonald's, he points out, is essentially a property business. A marketing agency is a people business, sometimes a contracts business, rarely both. The asset is different every time. What does not change is the discipline of knowing which one you are building.

It is worth pausing on how rare it is to get this far at all. Only around 2% of UK businesses ever reach a million pounds in revenue, Gallagher says, and 75% of the country's 5.7 million businesses have just one employee. Most owners are not failing to build something buyable. They are not building anything beyond their own job. Thinking like a buyer only becomes useful once you have got past survival, which is precisely why so few people ever get round to it.

The Coach Who Asked the Question, and the Three Numbers That Decide Value

Gallagher's own inflection point came with eight staff, turning over £20,000 a month, not paying himself, and a newborn daughter at home. He was paying his team before he paid himself, and then he had to make two of those eight people redundant. It was about as far from an asset as a business can feel. What changed it was a coach working out of the barn opposite his. Gallagher asked what the man did. "I help small businesses grow," came the reply, and Gallagher asked him to help grow his, initially in exchange for a free website. What followed was five years of 1,100% growth, a Deloitte Tech Fast 50 listing, European Fast 500 recognition, and the eighth-largest digital agency in the UK. The lesson he draws from it is not really about marketing technique. It is about accountability: someone outside the business, with no stake in protecting his ego, asking the plan-shaped questions he was not asking himself.

That discipline is what lets him talk so precisely about how a business is actually valued. Traditionally it sells on a multiple of operating profit, or EBITDA, earnings before interest, tax, depreciation and amortisation, which tends to produce a slightly more generous number than raw profit. Tech and FMCG businesses are often valued on revenue instead. Accounting and consulting firms sometimes get valued on their order book. There is no single formula, only one specific to your kind of business, and most owners have never asked anyone what theirs is. In agency terms, Gallagher's own working numbers run like this: under a million pounds revenue, a business is worth roughly three times profit; above a million, the multiple typically moves to around four, rising further as the business scales. A business turning over three million pounds with £700,000 profit might command six to eight times, putting its value near £4.9 million. He is selling a business right now, £5 million revenue and roughly £1 million EBITDA, for around £12 million, because the owners' team needs to expand into America and cannot fund that growth alone.

From this, Gallagher distils what he calls the three 20s: 20% annual growth, 20% EBITDA, and no single client worth more than 20% of billings. They sound suspiciously tidy, and he is upfront that real businesses rarely hit all three cleanly. What matters is the direction of travel, and a warning buried inside the third number that most owners would never guess: you can be too profitable. A business making 50% margin on £3 million turnover can end up priced so far above what buyers are willing to fund that it becomes genuinely hard to sell. Gallagher has a client at 30% profit and £2.2 million EBITDA who has struggled to find a buyer, simply because so few buyers have £20 million sitting around to spend. Profitability without proportion is its own kind of trap.

What a Buyer Is Actually Buying

Confidence is the thing every buyer is really purchasing: assurance that the business will still be standing, still winning, still worth the price, after the founder has gone. That is why buyers ask about leadership depth before much else. Is there a number two, a managing director, someone capable of running it without the person selling it. It is also why recurring revenue matters so much, though Gallagher is careful to correct a common assumption. Seventy to eighty per cent of his own agency's revenue was never contracted. What he could demonstrate instead was reoccurring spend over roughly three years, clients who kept coming back without being locked in, which buyers found just as reassuring as a signed retainer, sometimes more so. Buyers are not really buying a contract. They are buying evidence of a relationship that survives without one.

Marketing sophistication sits in the same category. Gallagher's rule of thumb is to invest around 5% of revenue in marketing, salaries included, scaling as the business does. Agencies, he notes with some irony, are often the worst at applying this to themselves, the busman's holiday problem: people who sell marketing for a living frequently neglect their own. He recommends thinking in terms of now, next and future, understanding what clients need today, what they will need next, and what they will eventually need. Clients rarely spend more than 5 to 10% of revenue on the "next" category, yet having that offer ready is what makes a business look forward-facing to a buyer weighing up whether it can survive the years ahead without its founder.

Inside a Sale, and Why the Route You Choose Matters as Much as the Price

The mechanics of an actual sale are more procedural than most owners expect. It starts with a valuation, followed by an M&A business audit, an exit-readiness check that surfaces what a business is quietly getting wrong without realising, often around how revenue is recognised. Then comes the information memorandum, a polished document that does for a business what a well-produced listing does for a house: heritage, growth story, culture, performance, case studies, awards. Alongside it, a target list, usually around fifty names, built from a genuinely personal question: who would your dream acquirer be, who does your team most respect, who could give your people the best next chapter. A small teaser goes out. Interested parties sign an NDA before seeing the full memorandum. When Gallagher sold his own business, he met twelve potential acquirers. Some, he says plainly, he would never have sold to, the culture fit was wrong. Four stood out. Three made offers. Then comes due diligence, buyers looking properly under the bonnet for anything from unresolved IR35 exposure to numbers that do not quite reconcile, sometimes holding back a portion of the price until it is resolved. The whole process typically takes six to nine months.

He pushes clients toward a competitive process with several interested buyers rather than accepting the first approach that comes in, because a single buyer holds all the leverage. Once you have mentally spent the money, due diligence becomes the moment they start chipping the price down and you have nothing to counter with. He knows of a friend who sold for £12 million cash off the back of a single phone call. It happens. It is also, in his experience, the exception that makes the rule worth stating.

Selling is not one transaction, it is a choice between several. A trade sale, to a similar business or a larger group, is the most familiar route. A management buyout lets the existing leadership team take over, though lenders will usually only advance around three times the business's multiple, meaning the exiting owner may accept less than the open market would pay in exchange for a calmer handover. An employee ownership trust sells the business back to its own team, though Gallagher flags an underappreciated catch: founders often do not get to walk away cleanly, because the business itself has to pay them back over time, and that repayment is not always guaranteed if the business's value later moves against it. Private equity tends to suit businesses that have reached around two million pounds EBITDA, where raising growth capital becomes genuinely easier, and it often lets an owner keep their brand and identity intact while someone else funds the next stage. Gallagher mentions a client he once mentored who took this path, brought in private equity after a couple of small acquisitions pushed him past two million EBITDA, and is still running the business himself fifteen years on, now at roughly £30 million EBITDA and operating in America. He still, in Gallagher's words, wakes up every day and loves his business.

What Nobody Tells You About the Morning After

The financial mechanics are the part people prepare for. What almost nobody prepares for is what happens after the money lands. Gallagher sold his own business at 37 and stopped working shortly after. He describes what followed with a bluntness that is rare in conversations about successful exits: there is a saying, he says, that when you retire from something you have poured yourself into, you go on holiday, you get depressed, and then you die, unless you find new purpose. He had left school at 16 with no qualifications. The business was the only real success he had ever had. When it was gone, so, briefly, was the identity built around it.

He worked his way back through something close to the Ikigai framework, the overlap between what you love, what you are good at, what the world needs, and what you can be paid for. He started an online kids' wallpaper business with his wife. What actually pulled him back into agency life was a string of calls from former competitors wanting help going digital, which turned into fifteen years of consulting before he moved into the M&A work he does now. He is honest, too, about the version of the story that did not go smoothly: a two-year earn-out where the buyer fired the person who had made the culture fit work, and the culture around him changed within months of the deal completing. Seller's remorse, he says, is real, and rarely discussed with the same appetite as the number on the cheque.

It shapes how he advises clients on something as ordinary-sounding as when to tell staff a sale is happening. Gallagher told his leadership team only once he had accepted an offer, and the wider team only after the transaction had actually completed, two weeks later, because somewhere between one in five and one in three M&A transactions never close, and telling people too early risks damaging morale over something that might not happen at all. He would rather protect a team from a false alarm than ask them to celebrate, or grieve, a change that may never arrive.

The instinct running underneath all of it, the coach in the barn, the three 20s, the fifty names on a target list, the honesty about what comes after the money, is the same one he now puts to audiences who never plan to sell at all. Understand what your business is actually worth today. Understand what it could be worth if you got it to the next stage. Either the number changes how you run the business tomorrow, or it confirms you are exactly where you want to be. Both answers are useful. The only mistake is never asking the question.

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