How to Make Your Agency More Profitable

Before you start applying any strategies to your agency, you should take a step back and analyze your current position

02:43 26 September 2024

Running an agency is stressful work. Not only will you have multiple responsibilities across multiple departments, but you'll also be in charge of making decisions that allow the company to remain profitable even during tumultuous times. 

How exactly are you supposed to make your agency more profitable? And what are the most sustainable strategies to accomplish this goal?

Analyzing Your Current Position

Before you start applying any strategies to your agency, you should take a step back and analyze your current position. Exactly how much money is your agency making? Where is that money coming from? What are your biggest expenses? What seem to be your biggest obstacles?

If you're going to make effective decisions, you need a way to measure all of these things objectively. For example, with agency management software, you can track things like company finances, team utilization, operational resource allocations, and even marketing and sales. It can help you get a higher-level perspective on how your organization is running, and feed you the data you need to make more objective, logical decisions for improving your agency.

How to Make Your Agency More Profitable: Key Strategies

With that context in mind, these are some of the most effective strategies to make your agency more profitable:

• Nail down your target audience. First, nail down your target audience. If you have a clear target audience and fully understand who they are, you'll be in a much better position to succeed. That's because you'll be able to distinguish yourself from your competitors, and simultaneously, you'll be able to improve your marketing, advertising, and sales strategies. In many cases, it pays to focus on a specific niche, both to limit your level of competition and to give your business room to grow.
• Work on your pricing strategy. Profitability heavily depends on your pricing strategy. If your prices are too low, you won't make much of a profit. If your prices are too high, no clients will want to work with you. Finding the right balance in an agency can be especially challenging, because you'll also need to consider product and service packages; in other words, you'll need to consider how you position your pricing in addition to the pricing itself.
• Use the Pareto principle to clean your client list. According to the Pareto principle, 80 percent of the results of a given system come from 20 percent of the inputs. In the context of an agency, 80 percent of your profits are probably going to come from 20 percent of your customers. You're probably going to have a handful of extremely valuable clients who continue to send you new work, as well as lots of little clients who only work with you in a limited capacity and temporarily. In many cases, it's worth cleaning up your client list and focusing on the clients who are most valuable.
• Put a stop to scope creep. Scope creep can kill an agency. Depending on the circumstances, scope creep can artificially increase your costs without increasing your revenue proportionally. Practice scope creep routinely enough and each of your arrangements will instantly become less valuable. Fight back against scope creep by setting better client expectations and pushing back against attempts to inflate scope.
• Improve client retention. For most agencies, client retention is much less expensive and ostensibly even more valuable than client acquisition. Accordingly, you should focus on keeping your best clients happy and building better relationships with them. It doesn't cost much, but it can help you generate more revenue and do it more consistently.
• Automate everything you can. Next, work on automating everything you can within your agency. There are obviously some tasks and responsibilities that can't be automated, especially those that involve building and managing human relationships with your clients. But each task you automate is going to improve consistency, save you money, and save you time all at once.
• Focus on specialists. It's typically better to hire specialists than it is to hire generalists in an agency. Specialists are typically a bit more expensive, and they have a narrower range of skills, but they can demonstrate mastery over those skills. Providing access to specialists can be a key area of differentiation in your agency, attracting more clients and ultimately producing better work.
• Hire slow, fire fast. Hiring itself is expensive, and every new hire in your organization is going to continue costing you more money. Conversely, firing people is relatively cheap and can save your business a lot of money. As your agency grows, you're going to need more and more people to keep things running, but in pursuit of this, it's a good idea to hire slowly and strategically while firing quickly. Be thoughtful and diligent before spending money on someone new, and don't be afraid to let them go if they're not a good fit.
• Build repeatable and scalable systems. Generally, your agency should focus on building repeatable and scalable systems. This will improve consistency and predictability while simultaneously setting a course for effective revenue growth.

There's technically no upper ceiling to how profitable your agency can become. But at a certain point, you'll be satisfied with your level of profitability and you can begin focusing on scale. If your agency is sufficiently profitable, and you start attracting more clients and doing more work, your nominal profits will begin to multiply.