Subject: 2025 was brutal. 2026 is better. Here's what that actually means.
Almost every agency owner I've spoken to in the last few months has said the same thing:
"2025 was the worst year we've had in a long time."
Multiples are stabilizing
The causes aren't mysterious. Clients pulled budgets faster than agencies could adjust. AI created procurement paralysis, buyers froze spend while figuring out what they actually needed. And pricing pressure came from every direction: offshore competition, AI tools, and clients who suddenly had interns producing first drafts.
2026 is showing early signs of recovery. Budgets are moving again. But here's what I want to flag:
Recovery doesn't mean return to normal.
The agencies that are winning right now have done one of two things. They've moved up-market — fewer clients, larger retainers, deeper strategic work that's genuinely hard to replace. Or they've moved down in cost structure using AI to deliver the same output with a leaner team, which improves margins even when pricing stays flat.
The ones struggling are in the middle — still pricing like 2022, still staffed like 2022, hoping the market comes back to them.
It won't. The pricing pressure is structural, not cyclical.
If your margins got squeezed in 2025 and you're not sure whether you're in recovery or just delay — that's worth examining before you decide whether to grow, sell, or restructure.
I look at agency P&Ls regularly. If you want a second set of eyes on yours, I'm genuinely happy to do that conversation.
Reply here or reach me at [email protected].
— Mukund
Vangal | micro PE for digital businesses