Profitability - The Lifeblood Of Your Agency.

Profitability is a term we don’t take seriously enough.?People talk about how much their agency is doing - in sales. “I want to get to 7 figures.”?

We talk about the top level number as if that was the thing that mattered. But that is more ego. It’s more ‘How big is yours vs mine?’

When we compare topline revenue, we are missing the point.?

The point from a purely financial perspective in a business, is to make money.?The money will sustain the business, allowing you to do the important work for your clients.?

This could be because almost all agencies suffer from poor profitability. Design, Production, Branding, Marketing, Communications Agencies.

What is it that we do?

We’re in the expert business. We’re in the knowledge business.

Very different to the business of shipping commodities, or shipping boxes. However, many are actually shipping commodities. They are defining themselves with labels, category names.

What’s your offer? Strategy, design? These are not offerings. They are very broad general terms.

Expertise is what people want to buy.?A combination of knowledge and expertise. Not just the output of what you do.?

Ask yourself - what business do you believe you’re in?

What are you selling? What is your ideal client buying?

In the expert business - we are supposed to make margins north of 25%.

Think about your business from the point of net profit that you want to make and then build everything from there. That will affect your strategy in a big way.?

How much do you want to make after all your costs, expenses and your own salary as well?

When you think of a 25% profit margin? Where does your agency stand right now? What’s your average? Is it fluctuating a lot? Is it very volatile?

There’s a cure for making it more predictable.

In order for you to get your profits up, you have to niche down. In order for you to grow topline revenue you have to niche down.

It’s counter intuitive but its true!

Niching down is the heart of strategy. This is essentially positioning.

When you position your brand, yourself, your service, it’s essentially about saying no to a lot of things and focusing on the vital few that will drive revenues up.