Agencies I Review, Issue 2: Where Brand Owners Should Spend

I review a lot of e-commerce businesses. Before I take a call on an acquisition, I run five numbers: revenue trend, net margin, channel concentration, client and SKU concentration, owner hours. If three of those come back weak, I pass before the intro call happens. It's not a gut check. It's a discipline I built from watching the same failure patterns wreck value, deal after deal.

Issue 1 of this series covered the five patterns that separate agencies I'd actually buy from the ones I pass on, from the acquirer's side of the table. This issue flips the lens. You're probably never going to acquire an agency. But you already hire one, or you're about to renew one, and the same five numbers work just as well pointed at your vendor as they do pointed at my next deal.

Most brand owners don't run any version of this checklist. They compare case studies, sit through a pitch deck, and pick whoever sounded most confident on the call. Then eight months later ACoS has crept up twelve points, nobody can explain why, and switching feels like starting over. The checklist below is how you catch that before you sign, not after.

1. Revenue trend: ask for their retention number, not their growth story

Every agency pitch opens with a growth story. New logos signed, a big client win, a slide with an arrow pointing up. None of that tells you what happens to the clients who've already been there a year.

When I'm looking at a business to acquire, I don't care about the trailing quarter's spike. I want the trend, and I want to know if it's durable. The agency version of that question is retention: what percentage of clients from a year ago are still clients today, and is that number improving or sliding. An agency that's growing by replacing churned clients with new ones at the same rate isn't actually growing. It's running in place while the pitch deck says otherwise.

Ask directly: "What's your client retention rate over the last twelve months, and how has it moved?" A confident agency has that number memorized. One that dodges the question, or answers with logos instead of a percentage, is telling you something.

2. Net margin: a chronic discounter is financing your account by cutting corners somewhere

Healthy agencies run 20-30% margins. That's not an arbitrary band. It's the range where pricing reflects the actual cost of good delivery, with room left to invest in the team and the tools that keep your account healthy.

An agency running well under that, chronically discounting to win or keep accounts, isn't passing you a discount out of generosity. It's financing that gap somewhere, and it's rarely on the invoice. It shows up as understaffing, as your account manager carrying twice the accounts they should, as churn on their own team that resets your institutional knowledge every few months. You don't see the underpricing directly. You feel it as slower response times and a strategist who seems to be guessing instead of knowing your account.

You can't ask an agency for their P&L, and most wouldn't tell you anyway. But you can ask how their pricing works, whether it flexes by scope, and whether they've ever discounted heavily to win a client your size. The answer tells you more about the model than any case study will.

There's a version of this that looks fine on the surface and isn't. An agency that wins you on a below-market rate and holds that rate for a year looks like a win for you. Watch what happens at renewal instead. A chronic discounter has to claw the margin back somewhere eventually, either with a scope cut you don't notice for a quarter, or a price increase timed to land after you've built the switching cost of a year of history with them. Honest pricing upfront is cheaper in the long run than a discount that gets recovered later on terms you didn't negotiate.

3. Channel concentration: their client book is your platform risk

This is the one I'd push hardest on, because it's the one almost nobody asks.

When I'm evaluating a brand to acquire, single-channel dependency is one of the fastest ways to kill a deal. The platform risk is real and it's gotten more expensive. Amazon's effective take rate, referral fees plus FBA plus storage plus advertising, moved from roughly 26% to 34% over six years. On a $1M brand, that's about $80,000 a year quietly gone, not from a bad decision, just from the platform moving the goalposts while nobody was tracking it. I watched an apparel-adjacent brand doing $180,000 a month on Amazon alone get hit with three frivolous IP complaints inside a single week. Forty-five days to clear them. $120,000 gone before the account was fully restored. That brand wasn't reckless. It was single-channel, and single-channel is a position, not a business.

Now point that same lens at the agency you hired to manage that account. If every strategist on their team has only ever worked inside one platform, if their entire client roster is single-channel, their incentives and their expertise are structurally pointed at keeping you exactly where you are. Not because anyone there is dishonest. Because it's the only tool in the shop, and recommending you diversify would mean recommending work outside what they sell. You end up paying full retainer for advice that can't see the risk you're actually carrying.

Ask it plainly: "What percentage of your clients are single-channel, and has your team built anything outside that platform?" If the honest answer is close to 100%, that's not automatically a reason to walk. It's a reason to ask a harder follow-up: how would they advise you the day that platform's fees jump again, or the day an IP complaint lands on your account. Watch whether the answer is a real plan or a shrug.

4. Client and SKU concentration: how many accounts is your account lead actually juggling

On the acquisition side, I want distributed revenue, not one product carrying 80% of sales, because one disruption ends the business. The agency parallel isn't your concentration. It's theirs, specifically the person assigned to run your account.

An account manager carrying 8 to 15 accounts can give each one real attention: watching daily metrics, catching a suppressed listing before it costs a week of sales, actually reading your reports before sending them. An account manager carrying 30 or more is triaging, not managing. Your account gets attention when something breaks, not before.

Ask directly: "How many accounts does the person who'll run mine actually carry?" Most brand owners never ask this, which is exactly why most agencies never have to answer it honestly until something's already gone wrong.

There's a second layer worth checking: how concentrated is the agency's own revenue on clients like you. An agency where three accounts make up half its revenue has an incentive structure pointed hard at keeping those three happy, and everyone else gets whatever bandwidth is left. That's not a reason to walk away if you're one of the three. It's a reason to find out where you actually rank, because that ranking is what determines whether you get proactive attention or a monthly report written the night before it's due.

5. Owner hours: ask who actually touches your account

The single most expensive pattern I see when I'm reviewing an agency to acquire is the founder as the product: the best strategist in the building personally touching every key account, which means the business is really just their calendar with a logo on it. I check owner involvement on every deal, and anything over 20 hours a week in hands-on delivery needs a real plan before I go further.

Flip that onto your own contract. The agency version of owner hours isn't how many hours the founder works. It's how many of those hours land on your account specifically, versus how much of your delivery routes through a junior team member three tiers removed from whoever closed the deal. You'd never sign a services contract this size without knowing who's actually doing the work. Most brand owners sign agency contracts without ever asking.

Ask it directly: "Who touches my account day to day, and how many hours a week does your most senior person spend on it?" If the answer is vague, or if it's clearly the account manager who closed you and nobody more senior after that, price that into your decision the same way I'd price it into an acquisition.

Run your own 20-minute diligence call

You don't need a data room to do this. Five questions, asked directly on your next call, whether it's a first pitch or a renewal conversation:

1. What's your client retention rate over the last 12 months, and which direction is it moving?
2. What's your typical pricing structure, and have you discounted heavily to win an account my size?
3. What percentage of your clients are single-channel, and has your team built anything outside that channel?
4. How many accounts does the person who'll actually run mine carry right now?
5. Who touches my account week to week, and how many hours does your most senior person spend on it?

None of these are gotcha questions. A strong agency answers all five without flinching, because the answers are the pitch. A weak one gets vague, redirects to a case study, or answers a different question than the one you asked. That reaction alone is diligence.

Where this leaves you

I built these five numbers to protect my own money on deals I'm putting real capital behind. They work the same way pointed at a vendor, because the underlying question is identical: is this business built to keep performing without me having to babysit it. An agency that would pass my diligence is an agency worth paying.

If you want the deeper breakdown of what actually separates agencies at this level, including the specific ratios and reporting standards for a mid-market brand, I wrote the fuller framework in the best Amazon management agency for a $1M-$10M brand. And if the cost math and the worth-it question are what's actually on your mind, how to choose an Amazon brand management agency walks through that in detail. Both build on the same acquirer's checklist I first laid out in what I look for when acquiring an e-commerce business.

If your current agency wouldn't survive the five questions above, that's worth knowing before your next renewal, not after. And if you'd rather see what daily, team-run management looks like instead of taking someone's word for it, that's what we run at AMZ Commerce Advisers.

I write about this stuff, real numbers, real diligence, both sides of the table, most weeks. The newsletter is the fastest way to get it.

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