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Profit & Growth Tips for Digital Agencies

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The #1 Reason Your Digital Agency Isn’t Growing

Posted by Nicolas Jacobeus on Jul 4, 2016

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Many digital agencies are able to grow in their early stages without much planning: one customer becomes two, three employees become four. But at some point this plateaus and your agency stops growing.

While there can be any number of reasons your digital agency isn’t growing – maybe you’ve had a bottleneck in the sales process, or you’ve had staffing problems recently – there’s one huge problem that can be holding you back. And it’s a matter of focus.

You’re Focused on Revenue, Not Profit

You’ve got bills to pay, important things like employees’ salaries and office rental. Revenue is important, but focusing on this rather than whether or not your agency is actually operating profitably means your focus is wrong. This keeps all your attention on the short-term, rather than planning for long-term, sustainable growth, and means you’re limiting your agency without realising it:

You Take on Poor-Fit Customers

When your focus is on revenue rather than profit, you’ll work with anyone who will pay you. This means you’re not focusing on working with good-fit customers, who complement your agency’s capabilities and value the work you are doing for them.

As such, you may have a lot of customers signed up and working with you, but those customers require a great deal of account management and time that’s not reflected in your fees. Therefore, you may even find that quite a few of these customers are losing you money, and the level of account management required can mean you’re limiting your agency’s growth.

Your Agency Team Aren’t Able to Grow

Working with poor-fit customers for the sake of securing revenue means that your agency team will constantly need to jump between different projects with different skills and requirements. While this can mean you’ve got an agency team of talented generalists, your team won’t have the opportunity to develop their skills and experience to specialise in particular areas.

How to Re-focus to Enable Growth

1)      Develop Processes to Improve Profitability

Inefficient working habits can hit profitability hard. If you’re working with a lot of poor-fit customers, chances are your account management is time-consuming and inefficient.

Developing key processes for common tasks involving your customers will help improve the efficiency of those tasks, and also improve your team’s focus and consistency. For example, you may want to develop a customer onboarding process, or a process for creating and submitting a project proposal. Both of these have sub-tasks that will be the same every time you do them, but having a defined process will ensure nothing gets forgotten and help your team complete that task in a timely way.

Learn more: How to Use Processes to Overhaul Agency Profitability

2)      Concentrate on Working with Good-Fit Customers

Your good-fit customers are likely to be more profitable than those who aren’t. Don’t fall into the trap of thinking your best customers are the ones who pay you the most money each month: if they monopolise your team’s time and effort, they might be bringing in lots of revenue but not be a profitable account.

You should focus your effort on identifying your agency’s best customers, and use those insights to try and work with more, similar customers. Working with good-fit customers means you will have a better relationship with those customers, and will help you move from one-off projects to regular retainer work as you build and strengthen your customer relationships. This will help stabilise your workload, and lay a steady foundation from which your agency can grow.

3)      Monitor Your Agency’s Resources

Your agency’s most valuable resources are your employees’ time and skills. You need to ensure you are making the most of your employees’ skills in the most profitable way, minimising time spent on non-billable work so you can dedicate more time and effort to billable work.

A Resource Management tool like Scale will provide you with an overview of your agency’s key resources, and how they’re allocated to each project. This can improve team utilisation and help balance your team’s workload. These types of insight are essential for helping you make informed, strategic decisions – such as whether to keep working with a client, or which employee should head up your next project – that are key to your agency’s growth.

how to make your digital agency profitable

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