8 Ways to a more Profitable Agency in 2019


Increase your agency’s profitability and get ready to conquer the year with the best tips from the industry experts.

When starting a business, the initial growth phase is marked by your ability to hustle & deliver; however, as your agency expands, additional problems of scaling can creep into your net profit.

Increasing profitability then becomes a fine mix of enhancing the perceived value of your service while ensuring a more efficient workflow.

Plan for growth

Really dedicating some time to the planning process is an effective way to drive increased profit margins and focus on the best opportunities. Accounting for every aspect of your business operations helps in identifying problems and ultimately increase efficiency.

Work towards your billing capacity on the right projects

Your billing capacity allows you to measure the maximum billable hours your company can invoice clients based on your current staffing. Comparing your actual billings to this metric, grants insights into whether your staff are working efficiently & on the right projects.

Analysing your project performance allow you to progress towards consistently profitable projects. By segmenting projects in terms of how successful they were & identifying the key aspects of those winning engagements, allows agencies to select future jobs that are more suited to their team. Efficiency comes in highlighting the strengths of your workforce and utilising them.

Review your Take-Home Pay strategy

We usually see that agencies plan for profit and the percentage increase they wish to make annually. While profit is understandably at the forefront of your business goals, planning for what you can draw out from your business each month is the more practical approach.

When you consider the intense work it takes to run an agency, your take-home salary is critical to understand as it directly correlates to the lifestyle you want to live.

Some business owners work around just their revenue or breakeven point, without considering take-home pay, which only provides an unreliable reference point for profitability.

Prioritising an increased take home pay will bolster your entire efforts around business profitability and will be a effective lever to your overall performance.

Pricing your services behind your UAV

We understand the complexity of pricing your services effectively. In a competitive market, it can seem viable to simply undercut other competitors. This problem is transparent in both small to large agencies, with smaller businesses attempting to penetrate markets while existing larger firms aim to expand their current share. However, low pricing can be evidence of not establishing your unique value propositions as strongly.

For instance, a marketing agency which has developed a niche amongst travel & accommodation would be in a good place to communicate a premium price point based on the additional IP, networks & case studies developed in this area.

Dial down on Free Services

A very successful strategy many tech firms have adopted offer a free service alongside a paid subscription with more features to it. Such a trend has become useful in several industries, with marketing teams aiming to enhance the perceived value of their service. Offering anything free indicates that you’re investing your time without a return and this can be a massive pitfall for many agencies.

Based on research, 40% of agencies do not charge for Project Scoping, 27% provide account management for free of charge, and 9% don’t accommodate for Project Management costs. We see so often that client consultation is free of charge; however, this is entirely reliant on you closing the deal.

Scaling down your valuable ‘free’ expertise to downloadable content and/or a blog, and offering consultations to only qualified leads will help increase the profitability of your sales & partnership executives teams tenfold. Your time is valuable and it is key to design the S&M pipeline around this.

Regularly Review Client Fees

We often see that larger agencies set up long-term contracts with clients at the start of their practice. Over time, these contracts can inaccurately reflect the value of the service, resulting in clients underpaying for it. It’s understandably challenging to ask clients for more money; however, in engaging in at least an annual or bi-annual review, you’ll get the real value of your service.

You can compare what they would be paying if they had purchased your service in recent times, which grants a statistical overview of your worth. It can be used in marketing efforts with long-term clients, offering them a discount to your current price while increasing the fees of your contract.

Price based on Perceived Value by Client

Client’s priorities can get overlooked as agencies price based on an hourly rate. It can be dismissive to the real aspects of your service that the client values, missing opportunities for revenue.

Consider the segments of your service that genuinely interest your client. Take a Software Development company, for example. Their clients seek a software solution to a business problem; however, would the redesign of their brand profoundly impact this end goal? If they increase their pricing of the development process while allocating less to design, they can profitably offset the cost of design.

Nailing your client’s main values provides extra perceived value to your service. Richtopia’s ‘The Eye of The Beholder: Perceived Value’ covers this principle in more detail.

Keep offering relevant services to existing Clients

Agencies regularly seek new clients to aid their end-goals; however, upselling to existing clients may be a much cost effective approach. The process of getting the initial relationship is the hardest part however, once you are a supplier, a client has been convinced of your perceived value and can be shown additional services with greater prospects for a sale.

Dedicating resources to keeping track of existing clients is a fantastic way to spot chances to upsell to clients. Scheduling regular conversations with your key clients throughout the engagement (either quarterly or annually) can help identify opportunities for further services. Not only does the dialogue improve the relationship, but it allows you to ensure your client’s end goals are on track.

Client Grading

Client Grading is a handy tool that allows agencies to grade their clients based on how well the project went. Depending on requirements, tend to alternate, and some do go better than others, so ensuring you’re targeting the better majority of those projects is essential. Effectively allocating resources enhances business efficiency, and grading provides you with a list of your best projects.

Focus on your ideal clients, giving them the best service so as to encourage similar placed referrals from their network. Having a reference to the quality of client helps to reinforce resource allocation factually.

Targeted Referrals

Having struck a deal with your client, you’ve identified a member of your target audience. Companies have connections to partner businesses, all of which are potential clients for you. Exploring these connections is an incredible way to highlight your business to a relevant audience.

You can incentivize this with a referral program, offering clients the chance to earn based on successful referrals.

Through thoughtful planning and some of the strategies highlighted above, your business will be ready to conquer the rest of 2019 and beyond. Increasing the profitability of agencies with our virtual CFO know-how is our passion – for more details, please reach out.

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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech & online companies.

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