Think about it. Isn’t the most important part of a marketing campaign what comes after the launch? From split testing to monitoring bounce rates, each metric has a story to tell.
6 tips to increase the profit margins of your digital agency
Whoever said running an agency is easy never peeked behind the curtain. Owning and operating a new digital agency means wearing too many hats – from getting clients on board, setting appropriate pricing, to dealing with talent shortage. You know what’s even more challenging? Staying competitive while increasing your profit margins.
In this article we’ll discuss how you can take your agency to the next level without increasing your costs.
But first, take a good look where you stand
How can you improve if you don’t know your baseline? So, take a good look at your current profit margin by measuring the right financial KPIs and be absolutely honest about where you stand. The next step is to set an achievable and realistic goal, keeping your scaling objectives and talent pool in mind.
Increase the profitability of your agency using these tips
1. Make time tracking a priority
Tracking time efficiently in your agency will give you a fair idea about the productive hours spent on a project end-to-end. This will also allow you to calculate your costs effectively and even quote a better figure in your next pitch.
For many of your employees, time tracking may seem like unwarranted micromanagement. Get them on the same page by explaining how individual tasks are aligned with the objectives of the agency, and when the agency grows, so do the active contributors.
2. Reduce business development time
A good way to increase agency’s profitability is to cut down on your business development time. Time spent in courting clients is in fact valuable time that can be channeled to produce quality work and consequently bring the value-add of your services to the forefront.
Here are two ways to reduce your business development time and increase your agency profits.
a. Develop processes to vet prospects to ensure they are a good match for your services.
b. Work smarter instead of harder by using templates for your pitches, proposals, and workflow instead of creating them from scratch every time.
c. Reduce the number of meetings and opt for project management platforms (for example, Trello or Asana) instead. Encourage your employees to update their progress on the platform as they complete each task related to a project so that you or other senior executives and managers have real time insights.
3. Get paid for your knowledge and expertise
Sharing your knowledge on your social media channels and in blog posts is a great way to establish authority in your niche and build relationships with prospects. You may even take this a step further by offering a free, no-obligation consultation call on your website. However, put a cap on the free consultation time. If prospects want to engage with you beyond that limit, make it clear that you would be happy to share your knowledge and expertise for a fair price.
4. Price your services based on the value-add
Some tasks may not take a lot of time to complete (for example, a sponsored Facebook post for a long-term client), but you know for sure that that post will get your client a lot of leads, which will ultimately translate into good business for them. Identify other such opportunities in your service packages and revise your prices based on the value your agency’s work will bring to them.
In this way, you minimize the time spent on a particular task, but still earn proportionally more, thus giving you a chance to increase your agency’s profitability efficiently.
To put this system in place, research your market thoroughly. Figure out what your clients are willing to pay for such services, what your competitors are offering, and set your price accordingly.
5. Focus on client retention
Getting more clients is not a great way to increase agency profitability. Moreover, getting new clients on board also increases your business costs. Instead, when you have a steady client base, focus on creating a robust client retention strategy to increase your profit margins from repeat business.
According to Instapage, loyal customers are 65% easier to sell to than new prospects and even a 5% client retention can lead to a 95% increase in profits. Moreover, as you build a relationship with your long term clients by consistently delivering quality work and exceeding their expectations, they are more likely to refer your services to others.
6. Encourage talented new comers to join your agency
Experience is not always an accurate reflection of someone’s quality of work. Some people are instinctively good at their job and can be even better when nurtured at the early stages.
Now, when you attract and nurture new talent, your employee acquisition and retention costs are lower whereas you can still price your services according to the value-add, thereby increasing your profit margin significantly. New comers will be happy for the mentorship opportunities from senior executives and will soon become valuable agency assets.
Final Thoughts
The ultimate goal of any business is to make money while keeping costs low. While this is hard and detail-oriented work, monitoring the right metrics can certainly help you maximize your agency’s profit margins.
Wondering what should be the ideal profit margin of your agency and how you can achieve your growth goals? Book a consultation with us by dropping an email at saira@ssyaccountingandtax.com.
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