The type of work done in agencies can be a factor in their financial parameters. Establishing open and transparent communication with clients can help build trust and increase the lifetime value of each customer. Investing in talent, technology, global coordination skills, researching new services, and even creating new business ideas can benefit the agency, its partners, and customers.
The basis of an agency's profitability is its ability to be efficient in earning revenue and setting up projects for success from the start. Specializing in certain areas can also help increase profitability. Traditional agency models may not be able to keep up with the ever-changing landscape, so they may need to hire freelancers or external collaborators.
Benchmarking data can be used to compare your agency to the industry. Putting extra effort into increasing repeat business rather than finding new clients will give your agency a faster return. Generally, agencies should aim for a 20% margin when it comes to customer profitability.