How do I make my agency more profitable?

First let’s discuss what we mean by profitability……………….

In my experience the following is true:

• < 10% EBIT = serious operational issues

• 10%-17% = doing ok, but we can do better

• 17%-25% = we’re doing great

• >25% = wow, we’re flying, what shall we do with the cash

HOWEVER, if you haven’t yet ‘normalised’ your profitability, we need to look here first. What do I mean by ‘normalised’ profit?

Well, if the following is true then your true level of profitability is actually much lower (and there’s some work to do)

• You’re (you and your team) not paying yourself a market rate salary

• You have really high levels of profit (more than 40%), but you haven’t accounted for your dividends in your own remuneration

• You account for your clients media spend in your cost of sale

How do we become more profitable?

It involves a combination of the following strategies:

• Fixing or sacking under-performers (clients, employees & services)

• Price increases

• Cost reduction

• Revenue efficiency (becoming super efficient at earning our revenue) through

  • Systematisation of processes

  • KPI’s, review, reporting and constant improvement

  • Innovation

  • Training and up-skilling

  • Talent attraction and recruitment

How do we do that?

The long story, it depends on your business model, client base, services, pricing, teams etc. i.e. It depends on where you’re starting from!

So how do we figure out what to do? Firstly, watch this great video and interview with marcel Petitpas from Parakeeto where we discuss:

• KPI’s for digital agencies

• Time tracking for digital agencies

• How to produce estimates

• Gross margins for services (PPC, SEO, Web Development etc.)

• Billable rates for digital agencies

https://www.youtube.com/watch?v=rUZcjKk5m9E&feature=youtu.be

Then, get in touch using the form below - we’d love to talk and help if we can!