As we approach the end of the year, we are having lots of conversations with agency owners around how to best prepare for the sale of their agency. With this in mind, I thought I would share the answers to some of the key questions we get asked. Agency valuations are under more scrutiny than ever. With rising costs, shifting client budgets and AI reshaping delivery, buyers and investors are looking for predictability, not potential. That’s why understanding and presenting a clean, normalised EBITDA or “Earnings Before Interest, Tax, Depreciation and Amortisation”, matters more than ever.

If you run a creative, digital or PR agency, your numbers can look messy: retainers start and stop, projects spike and the odd “founder’s perk” sneaks through the card machine. When it’s time to raise money or sell, buyers don’t want messy, they want a clear view of what your business really earns.  That’s where normalised EBITDA comes in.

This guide explains, in simple language, what normalised EBITDA is, why it matters, what usually gets adjusted and how to prepare your numbers so buyers (and banks) trust them.

What is EBITDA?

EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortisation.

In plain English, it’s your trading profit before funding choices (loans), tax, and non-cash accounting charges. Think of it as a tidy snapshot of how your agency performs day to day, before all the financial “noise”.

But even EBITDA can be messy for agencies, because owner pay, one-off costs and accounting quirks can distort the picture. Sounds simple enough – but here’s where it gets messy for agencies.

That’s why we go one step further.

So what does “normalised” mean?

Normalised EBITDA asks a simple question: “If a sensible buyer owned this agency and ran it in a normal way, what would the earnings look like?” To answer that, we remove anything that is:

• Personal – owner perks and family costs.
• One-off – costs that won’t happen again next year.
• Accounting-only – entries that don’t reflect day-to-day trading.

In other words, it strips out the noise so a buyer can see what your business really earns in a normal year. The result is a cleaner, fairer number for negotiations and bank lending.

Why should you care?

Here’s why normalised EBITDA matters to you, even if you’re not planning to sell tomorrow:

• Valuation: Most deals in our sector are priced off a multiple of normalised EBITDA. Add-backs of just £50k can move value by hundreds of thousands.
• Debt capacity: Lenders look at adjusted EBITDA to decide how much they’ll lend against your business.
• Earn-outs: Clear definitions up front prevent arguments later about what “counts” towards your targets.
• Speed and confidence: A clean set of adjustments saves weeks in diligence and keeps deals moving smoothly.

Typical normalised EBITDA adjustments for UK agencies (no jargon, just examples).

These are the adjustments we most often see when working with creative, digital and PR agencies.

Owner pay: Replace whatever you currently take (drawings, dividends, bonuses) with a market-rate salary for someone doing your job. For an agency that has £1m turnover, that would typically be around £100k-£120k cash salary plus employer’s NI and pension. If you’re London-based and hands-on with sales, the higher end is easier to justify.

Personal or lifestyle costs: Anything that wouldn’t exist under new ownership, personal travel, club memberships, home broadband, private cars, that “business” Peloton, all come out.

One-offs: Office moves, rebrands, redundancy programmes, legal settlements or big systems changes. If it won’t repeat, it’s a candidate for an add-back.

Non-cash accounting items: Share option charges, goodwill write-downs, or old bad-debt write-offs. These cloud the trading picture and usually get stripped out.

Policy quirks: Leases that have been pushed out of the P&L by accounting rules, or development costs that have been capitalised. Buyers often reverse these so rent and routine development spend sit where they naturally belong, in operating costs.

Pass-throughs:Media inventory or freelancers you recharge at (or near) cost inflate revenue and expenses, but don’t add margin. Savvy buyers strip these out to focus on your true agency economics.

The owner’s salary question (becuase it always comes up)

Of all the adjustments, this is the one that sparks the most debate.

Buyers aren’t paying for your current lifestyle, they’re paying for what it costs to replace you. That means setting a market salary for a full-time Managing Director and adding on-costs:

• Salary (say £100k- £120k as a central case for a £1m agency).
• Employer’s NI and pension (roughly 14–16% combined, as a rule of thumb).

We usually show sensitivities at £100k, £100k and £120k so everyone can see how valuation moves with this judgement call.

How to prepare your agency’s normalised EBITDA for sale or valuation

If you want your numbers to stand up under diligence, whether from a buyer, bank or investor, the process matters as much as the maths.

1. Work off monthly numbers, not just year-end. Agencies are seasonal. Twelve to twenty-four months gives a fair view.
2. Tag each adjustment as personal, one-off, non-cash or policy. If it’s grey, write one sentence explaining why.
3. Tie everything to evidence. Invoices, payroll runs, board minutes, lease agreements. When it comes to diligence, evidence always beats opinion.
4. Show two scenarios. A buyer-friendly version (stricter on add-backs) and a seller-friendly version. Transparency builds trust.
5. Be consistent. If you reverse lease accounting to put rent back into EBITDA, treat the related lease liability as debt in the equity bridge. Consistency matters more than creativity here.

Common mistakes we fix all the time

• Forgetting on-costs on owner pay – salary is not the whole cost.
• Double-counting an add-back (e.g. backing out a rebrand in marketing and again as “exceptional”), pick one place.
• Leaving pass-throughs in “revenue”, it looks bigger but isn’t better, buyers see through it.
• Blurring EBITDA and working capital, write-offs and WIP adjustments need careful treatment so you don’t fix one number and break another.
• Calling routine costs “one-off”, annual awards entries, recurring conference spend or regular recruitment fees are normal operating costs.

A quick DIY checklist before you share your numbers

• Have you removed personal and one-off costs?
• Is the owner’s pay reset to a market rate plus on-costs?
• Have you excluded pass-through media/freelancer costs from your story?
• Are non-cash charges and accounting quirks clearly explained?
• Do you have 12-24 months of monthly P&Ls to show seasonality?
• Can each add-back be evidenced with a document?
• Do you have buyer-friendly and seller-friendly versions ready?

If you can tick these, your normalised EBITDA will stand up to questioning and your deal will move faster.

Final thoughts

Getting your numbers “normalised” isn’t about dressing them up, it’s about building trust and speeding up deals. Buyers don’t expect perfection, but they do expect clarity and consistency.

If you’re thinking about raising investment or preparing your agency for sale, it’s worth getting this right early. At Rocksteady Finance, we help agencies prepare clean, credible financials that stand up to buyer scrutiny – without the jargon.

👉 To learn how we work or click HERE to book a chat with our team to get your agency deal-ready.