Profitability: A Daily Reality for Your Agency

You’ve poured your heart and soul into your agency. Each day, you take steps toward growth and — hopefully — higher profits. But it’s not unusual to feel like you’re stuck in a hamster wheel despite your most concerted efforts.

What if profitability no longer felt like an aspiration and instead became a reliable pattern for your business?

Believe it or not, we’ve seen this happen time and time again for agency teams like the folks at Thrive Digital, who experienced a 40% increase in profitability using Accelo. 

We’re sharing how agencies like yours have overcome common obstacles to jumpstart profitability despite tough economic circumstances.

The State of Agency Profitability

According to Accelo data, just 40% of small businesses are truly profitable. Meanwhile, 30% are breaking even and 30% are operating at a loss. It’s a concerning landscape, especially in a climate where agencies are investing less in talent and paid marketing.

Growth is there, but it’s more of a crawl than the brisk walk you may have been used to before inflation and job market struggles took center stage.

If there is a secret sauce, it’s one that’s always been there as an option but might’ve been overlooked for more pressing matters: improved efficiency. Let’s look at what could be standing in the way for your team.

Trouble With Budgets, Utilization and Timelines

The profitability triangle is the relationship between three core elements of profitability. We’ve heard from countless agency leaders who are encountering difficulty in the three areas of budget, utilization and timeline. 

Here are a few examples of problems you may recognize as having cropped up in your agency, too.

Lack of billable rate tracking

If you’re under the impression that fixed-rate client billing absolves you from tracking billable rates per employee, you’re setting yourself up for a profitability pitfall. Relying solely on your P&L statement can lead to skewed insights if you’re not attaching money to productivity. Correcting this oversight can pave the way for more accurate project plans and clearer financial forecasts.

Veiled low utilization

If you’ve designated a particular hourly wage for your team member but are billing your clients an arbitrary market rate, there’s a disconnect between these figures. Add to this the negative pressure that comes from that employee’s hours being largely non-billable, and you’ve got an expensive problem. However, you may not be aware of its impact on your margins if you have no way of calculating employee utilization rate.

The sneaky cost of delivery

When you have lots of unique clients and projects, it’s tempting to price out work with a singular focus on the end result, which means you may be at risk of neglecting delivery costs or your profit goals. This approach can lead to financial roadblocks down the line. It’s much more efficient to have a standardized, repeatable routine that not only ensures timely delivery but amplifies profitability — and yes, this is possible in an agency context.

Synergy as the Solution

Recognize any of the above issues as something your agency is facing? A unified strategy for client work management could be your path to streamlining operations, refining financial practices and consistently watching your margins grow. 

Profitability shouldn’t be a hope or a wish. Make it your new routine: Register for our latest on-demand webinar, where Sales Manager Lissie Peach and I dive into the solutions to these scenarios.

Catch up on the other webinars in our agency series, too: Agency Profitability and How To Know if Your Agency Is Using Too Many Tech Tools.

About the Author

Whitney Luke is Director of Solutions Consulting at Accelo, where she and her team help prospective customers identify and solve challenges in managing their client work. In over three years at Accelo, Whitney has onboarded several hundred clients. Her favorite part of the job is getting to know talented business leaders and seeing the huge impact Accelo can have on efficiency and profitability.