I’ve been working with ambitious agencies for nearly eight years now. Based on what I’ve seen in that time, I wanted to share my top 7 tips to help you increase the profit your agency makes.
It always amazes me how few agencies go into the detail necessary when it comes to forecasting. The most profitable agencies start with the profit they want to make and work back from there. They think about their staff costs and utilisation rates to help them hit a Gross Profit margin over 50%.
This will give them sales targets, which they break down into the type of work that’ll make up the target. All of this goes into a detailed month-by-month forecast, so that they can track performance. Of course, it’s possible to make profit without all of this effort, but if you’re serious about hitting the higher levels of profit, you’ll need to go into this extra detail. I’ll show you exactly what this looks like during our upcoming Agency Profit Program.
Our 2021 BenchPress study showed that only 19% of agencies knew their clients’ budget before quoting. These 19% have a distinct advantage over those that are guessing their clients’ budget when they quote. The good news is there’s a tried and tested way to discover your clients’ budget – following the guidance in this article will give you the edge. Something else that will help is to issue three pricing options every time you quote. This podcast explains the power of giving options when quoting and how it can transform what you end up charging clients.
Our BenchPress research shows that there is a correlation between pricing and profitability, which is why we ran a webinar earlier this month that showed you how to increase your prices. There was lots to digest from this, but the tip that stood out for me was the impact moving to tiered pricing had on profitability. Have a listen from 27:00 onwards and you’ll see how powerful this could be for your agency.
So much profit leaks out of agencies due to scope creep. The good news is that there are several ways to avoid this happening. I’ll share them all during our Agency Profit Program, but I wanted to reveal one of them here. When starting a new project, ask your client a simple question: “How do you want to handle things when the scope of the project changes?” It may sound obvious, but it provides you an opportunity to work out who has the authority to change the scope, what the sign-off procedure is, and how this will be charged for. Doing this calmly at the start of the project is much better than trying to have this conversation when both you and the client are stressed 48 hours before a key deadline.
Only 33% of agencies are able to measure profit by service offering. If you’re not doing this, you’re missing out on the opportunity to work out where you’re making money (and where you’re not). Once you’ve worked this out, you can focus your efforts on your most profitable service. How can you ensure that every client you have buys this service?
There is untapped potential in your existing clients. The most profitable agencies are masters at unlocking this. They have written account plans for their existing clients, which shows the revenue they plan to generate over the next two years and how this might be broken down. They regularly pitch ideas to their clients, knowing that even if the client doesn’t buy one of these now, pitching ideas helps build the relationship and sows the seeds for future projects.
If you’re the only one who’s thinking about profitability in your agency, it can often feel like a lonely pursuit. The most profitable agencies are brilliant at engaging their whole team in increasing profit. This starts by helping them understand why profit is important and what they can do to help increase it. A really simple concept for people to rally around is to stop doing work for free. No one wins when this happens. Clients don’t value it, people work longer hours, and there’s less profit at the end of the day to invest in the growth of the agency.
These tips are just a fraction of what we’ll cover in our five-part Agency Profit Program, which is designed specifically for agencies with fee income between £500k – £3m. If you’d like to dramatically increase the profits you make, you can join me and purchase your tickets here. Wow clients get 50% off (contact me for the discount code).
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