Navigating Acquisition Pitfalls in Agencies

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Buying another agency sounds like a shortcut to scale — but if you skip the wrong step or miss the wrong promise, you might inherit more problems than profit. But how do you actually approach due diligence to ensure a seamless, profitable acquisition?

Today’s featured guest learned these lessons the hard way. What started as a promising deal quickly revealed cracks, forcing him and his partner to navigate unexpected challenges to pull the agency through. In the process, he discovered the key questions you must ask before buying another agency and the hidden details that can make or break your investment.

If you’re an agency owner thinking about using acquisitions as a growth strategy, today’s conversation will equip you with real-world insights to avoid costly mistakes and set your agency up for a smoother, successful expansion.

Matt Marchetta is an agency owner with two decades of experience who recounts his journey in the industry, from starting his first web design business in high school to pivoting into e-commerce and ultimately becoming a digital nomad.

He teamed up with a partner to acquire Growth Labs, a lead generation shop focused on outbound. He goes over some of the challenges and crucial lessons learned during the acquisition process, particularly concerning due diligence, unforeseen client guarantees, and the original owner's significant personal brand influence on the agency's client base.

In this episode, we’ll discuss:

• Why buy another agency in the first place?

• Due diligence traps that cost real money.

• The ROI guarantee that almost blew up the deal.

• 4 questions you must ask before your next acquisition

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From Solo Hustle to Ecom Growth Machine

Matt started his agency journey as a kid who just wanted to work for himself and quickly learned the hard way—like many do—that running a business isn’t just about being good at the work, it’s about learning the business of business. It’s a time he remembers fondly as a great foundation for his business education.

He pivoted early from generalist design and dev work into e-commerce, riding that wave as it grew. Over time, he layered in Facebook ads, video production, and photography to support product marketing for his clients. And while many were stuck in offices, Matt was ahead of the curve, running remote from day one, carving out a lifestyle business that let him travel, stay flexible, and keep agency life fun.

In fact, he never thought seriously about the possibility of selling his agency, since it’s something he really enjoys doing and didn’t think he’d ever get an offer that would compare to what he thinks it’s worth.

Why Buy an Agency?

So why would a guy who loves the freedom of his own agency buy another one?

Simple: leverage and evolution.

Matt and his current business partner decided it was time to level up their respective agencies. They were both tired of being generalists and saw an opportunity to specialize, automate, and potentially transition out of day-to-day client grind by acquiring a business with the right foundation.

They didn’t go hunting for a big fish they couldn’t afford. Instead, they targeted a sub-seven-figure agency they could buy at a fair multiple, with the goal of systemizing and growing it. Enter Growth Labs, an outbound lead gen agency specializing in cold email marketing.

What They Looked For Before the Purchase

Matt and his partner moved fast but smart:

• Profit and Loss: They dug into five years of P&Ls, noticing the typical COVID spike, post-spike drop, and finally profitability as the owner prepared to sell.

• Adbacks Reality Check: The books had plenty of “personal expenses” that, once removed, showed a clearer, stronger profit picture.

• Pipeline and Clients: They signed an NDA to peek at client lists, learning that the agency’s lead gen often came from the owner’s personal brand and reputation—great for credibility, but also something they’d need to replace with systems.

• Recurring vs. One-Off: They checked churn, recurring revenue, and how the business handled its leads and delivery so they wouldn’t be buying a leaky bucket.

Fast Close, Strategic Future

In true operator fashion, Matt and his partner put in an offer quickly (about three weeks after initial discussions) and agreed on a 1.3x EBITDA multiple. They wanted the former owner to stick around for a transition period, ensuring continuity while they layered in their own systems and strategic direction.

Everything looked clean. The seller had a strong personal brand. The books checked out (after adbacks). The plan was clear: earnout over three years, phased transition, and keep the seller involved for 12 months to ensure smooth client handoff and he agreed to do it.

Then the cracks appeared.

The ROI Guarantee Bomb

While poking around Slack before the official handover, Matt found discussions about an ROI guarantee with a disgruntled client. The seller brushed it off as a “Horoszi-level mistake from years back.”

No big deal, right?

Wrong.

Turns out, most new client contracts still included these ROI guarantees—often unwritten, often unenforceable, and often unrealistic. Combine that with underperforming cold email campaigns, and you have a recipe for churn, complaints, and a legal minefield.

What was supposed to be a 2-month campaign turned into 12-month obligations with clients expecting a magical ROI that the agency couldn’t verify, let alone control.

4 Lessons Matt Learned (So You Don’t Have to)

In hindsight, Matt admits they moved too fast. A few weeks wasn’t enough because due diligence should take longer than you think. His advice for agency owners is not to feel pressured—take the time to ask uncomfortable questions and look for patterns and keep these 4 aspects in mind:

1. Don’t just check contracts. Check promises. Matt discovered clients were sticking around for the wrong reasons—and the wrong terms—due to handshake promises that should’ve been flagged during due diligence.

2. Thoroughly analyze client data and churn patterns. Analyze the available metrics to determine whether or not clients are actually reaching goals. In his case, Matt found that using AI would’ve helped him uncover that consistent MRR masked a perfect churn pattern: lose three clients, gain three clients, every month. AI could’ve shown these patterns in minutes.

3. Expect that when the seller leaves, 80-90% of their lead gen leaves with them. If the agency’s pipeline depends on the owner’s personal brand, you need a plan to replace that before you wire funds.

4. Dig deeper into why the seller is selling—and why they started. Was the agency a real business solving a real need, or just a personal brand ATM for the founder? That origin story tells you how the business was run and what baggage you’re buying.

The Silver Lining

Was it all doom and gloom? Nope.

Matt discovered that despite the outdated “spray and pray” cold email approach, the agency’s foundations were solid: a capable team, strong email infrastructure, and processes that could be upgraded with AI personalization and scalable systems.

Instead of throwing in the towel, Matt is now rebuilding Growth Labs into a smarter, tech-enabled lead-gen agency aligned with the future, not the past.

And despite the headaches, Matt and his business partner are still hungry for more acquisitions, now with clear systems and smarter questions in hand. They’re even considering rolling up a group of specialist agencies as their next move.

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