You could be juggling multiple clients and have a calendar packed with projects, but your agency business model is unsustainable if the profit margins aren’t there.
Profitability is the lifeblood of your business.
Without it, you’re grinding for little to no reward.
In this guide, we’ll share practical tips on how to increase agency profitability.
From nailing down your niche to optimizing your operations and maximizing revenue, we’ll go through the strategies that successful agencies use to grow their profits.
We’ll cover:
- Are digital marketing agencies profitable?
- Why you should focus on a niche
- How to make your agency more efficient
- Why pricing is key for maximizing agency profitability
- How to get more clients and boost agency revenue
- How to scale your agency sustainably
Are Digital Marketing Agencies Profitable?
The straightforward answer is yes, they are. But it’s not a one-size-fits-all answer.
Some agencies make more net profit margin than others.
Overall, the digital marketing industry is booming. The global digital marketing agency market is predicted to be worth nearly $9.5 billion by 2027:
More and more businesses are switching to digital-first marketing strategies. The demand for digital marketing services is higher than ever.
The average profit margin for marketing agencies is also reasonable. According to a recent survey by HubSpot, 26% of agencies report healthy profit margins of between 11 and 20%:
So, there are a bunch of opportunities out there. And most agencies report good profits.
But achieving profitability doesn’t happen by chance.
How to Make Your Marketing Agency More Profitable
Here’s how to boost your revenue and maximize agency profits.
Identify Your Niche
The digital marketing industry is competitive. It’s easy to get lost in the crowd.
That’s why focusing on a specific service offering or type of client can really help your agency stand out.
You could focus on a service you’re experienced with, like SEO or content marketing, or serving a certain industry, like healthcare or ecommerce.
Narrowing in on a niche means you’re not trying to be the best at everything for everyone. Instead, you’re aiming to be the go-to expert in a specific area.
Focus on a specific niche and build a team with the skills in that area. This can lead to better client results and a stronger reputation for your agency.
Clients are often willing to pay more for your specialized services when you’re seen as an expert in their niche. This can help increase your agency’s profitability.
You can also be more targeted with your messaging and reduce the number of agencies you compete with.
If you want to build a profitable agency, it takes two things.
A great offer for a specific target market.
And consistent outreach to find those clients.
— Niti Sarran (@NitiSarran) September 5, 2022
This can make it easier to win new clients.
Finding your niche isn’t easy. You need to reflect on your current service list and client base.
Consider which services you have had the most success with and the projects you enjoy working on.
You also need to consider which industries you’re experienced with or passionate about.
It’s where these intersect that you’ll find your niche.
Making Your Operations More Efficient
One of the simplest ways to boost profitability is to make your operations more efficient. By reducing operating expenses through optimization, your team can get more done with the same amount of resources.
There are a ton of tools out there to help you streamline your work.
From project management software like Trello and Monday to SEO tools like Ahrefs and SurferSEO, using the right tools can help your team spend less time lost in spreadsheets and emails and more time on what they do best.
The trick is to make sure you’re using the right tools and that your team knows how to use them effectively.
That’s where standard operating procedures (SOPs) come in.
A SOP is a set of instructions that details how a task should be performed. You can create SOPs for everything from new client onboarding to SEO audits.
Take a look at the tasks that your team regularly performs. Then, ask the most experienced team members in that area if they have a standard way of performing these tasks that everyone else should follow.
SOPs can be an effective way to streamline business processes and boost efficiency. They can also help you deliver consistent results and strengthen client relationships.
If you need some help establishing SOPs, check out our detailed guide on creating marketing agency SOPs.
Effective Pricing Strategies
Pricing has a significant impact on the long-term success of your agency.
You want to be competitive but also make sure that you maximize profits from your services.
First, you need to know your costs. That includes your team’s time, tools, software subscriptions, and more. When you know your costs, you can price your services to cover all your outgoings and add a healthy profit margin on top.
It’s important to remember that your services are worth more to your clients than your total costs. If you can get a client to rank high for multiple relevant keywords, the value to your client could be transformational.
Pricing based on value lets you set prices that reflect the benefits you bring, which can be much higher than just cost-plus pricing.
It’s also important to understand what other agencies charge for similar service packages.
Semrush has a useful breakdown of the pricing for different digital marketing services. However, you should do some research to find out what similar-sized digital agencies are charging in your area.
It’s not about copying your competitors’ pricing. The goal is to understand the market rate so that you can position your agency.
If you offer premium services, you may be able to justify higher prices.
If you need some help pricing your services, take a look at our SEO pricing model guide. It walks you through the different pricing models and factors you need to consider to price your SEO services effectively.
Get More Clients
If you want to increase profitability, you need to grow your client base.
More clients means more revenue. It can also help you grow your network and strengthen the reputation of your marketing agency.
Start with the connections you already have. According to a recent survey, referrals and word of mouth rank as the top two ways that agencies acquire new clients:
Reach out to clients you’ve worked with in the past.
If you’ve delivered great work for the client, ask if they know anyone else who could benefit from your services. You can offer a discount on your services or a reward in exchange for any referrals.
Industry events, local business meetups, and online groups can also be great places to network and meet new clients.
Once you’ve made a connection, you need to demonstrate your value. That’s where client success stories are invaluable.
The best marketing for your marketing agency is overdelivering & focusing 100% on client results.
— Chris M. Walker (@cmwalker) May 15, 2023
Make sure you collect testimonials, case studies, and reviews from your satisfied clients. These are powerful forms of social proof you can use on your website and marketing collateral.
When potential clients can see the results you’ve delivered for previous clients, they’re much more likely to trust and choose to work with you.
Scaling Your Agency
Scaling your agency can have a big impact on profitability. As you grow and take on more clients, you take advantage of economies of scale.
That means the average cost for performing a task decreases as the volume of work increases.
This is because your fixed overhead costs, like tool subscriptions and office space, are spread across more clients and projects. You get more out of your resources, so your gross profit margin increases.
Building a profitable agency isn’t about the tech stack you use
It’s about marketing, processes, and scaling
— Nat Miletic (@natmiletic) January 14, 2023
Scaling your agency is about more than just taking on new clients. It’s about setting up your team and operations so you can handle more work and generate more revenue without dropping the quality of your work.
First, consider expanding your service offerings. This can be a great way to generate more revenue streams from existing clients and attract new ones.
The key is to make sure that your new offerings are aligned with your strengths. For example, if you mainly focus on SEO and content marketing, you might want to add infographic design and video marketing to your service list.
You can provide a more comprehensive digital marketing solution for your clients by offering these services.
As you take on more clients and add to your service list, you’ll also need to increase the size of your team. That could involve hiring more staff or investing in training your current team.
A more cost-effective way to enhance the capabilities of your agency is to outsource. That way, you can take on larger projects without the upfront investment of taking on new employees.
Depending on your current demand, you can also scale up and down your outsourcing.
In a recent survey, business owners ranked greater flexibility and increased efficiency as the two biggest benefits of outsourcing:
Outsourcing tasks like content creation, graphic design, and link building can free up your team to concentrate on your core services.
If you’re looking to scale your agency, check out our guide on outsourcing SEO. You’ll learn what you should consider before you reach out to a third-party provider and how to ensure high-quality deliverables.
How to Build a Profitable Agency in 2024
We’ve covered the strategies you can use to maximize revenue and achieve sustainable growth.
Acquiring more clients and clever pricing can be super-effective ways to boost profits.
However, you also need the internal processes and capabilities to deliver results that will delight your clients and keep them coming back for more.
It’s about building a solid foundation that can support the growth of a successful agency.
Become a Pro at SEO
Join 65,000 others and learn the secrets to SEO success with our weekly blog posts.
