8 Ways You Can Grow Your Digital Agency and Your Bottom Line

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    Team of developers working while getting clients and agency results (source: freepik.com)

    Are you too busy with client work to find time for your own business planning? Answering yes is a clear sign you need to make some changes. You may not have noticed, but your competition keeps growing and growing. In fact, the total number of digital marketing agencies in the U.S. has grown 54% from 2018 to 2023. If you don’t have a plan to keep up, your agency might be left behind.

    So how can you ensure your agency will thrive in this extremely competitive environment? Take a step back and evaluate your business, your service offerings, and your financial strength.  

    Below are 8 areas to focus on that can help grow your agency’s revenues and/or profits.

    1. Prioritize Profitable Services

      The first thing to do is understand your financial statements. The average marketing agency in the U.S. makes 17% pre-tax Net Income. Whether you are above or below that standard, you need to understand why. Do you know which service offerings provide your agency the most revenue? How about which services are the most profitable for your business? 

      As part of your plan, start developing strategies to 1) grow your profitable service categories and 2) to increase your margin on those services that aren’t currently doing so well. And if you can’t increase profits on the low margin offerings, consider dropping them or outsourcing that work.

    2. Add New Services and Revenue Streams

      Are you currently meeting all of your clients’ needs? If not, consider adding a new service offering or two to your portfolio. If done correctly, you might increase both revenue and your customer retention rate at the same time, as your clients will no longer have to look elsewhere for missing gaps in your offerings.

      Research shows that search engine optimization (SEO) is currently ranked as the most profitable agency offering, while social media marketing, content marketing, and website development are the top three revenue streams for agencies. Online advertising, or paid search, is another option to consider.

      Regardless of the services you contemplate, weigh the value it will add for current clients, as well as potential new clients. Take time to evaluate what it will take to achieve success for each new offering: experience, staffing requirements, competition, process, investment, etc.

    3. Grow Existing Client Accounts

      We’ve all heard that retaining clients is much easier than finding new ones. In fact, it costs 6x to 7x more to acquire new customers than to retain existing ones. But that's not all. Studies also show that existing customers are 50% more likely to try new products and spend 31% more than new customers.

      If you’re interested in growing your agency revenue, developing a plan to increase your business with your current customer base is a good place to start. Think of opportunities to upsell and cross-sell your existing clients. For example, if you offer on-site SEO services with your website design packages, consider offering off-site SEO as well or ongoing monthly SEO packages. If you currently offer ongoing content marketing or copywriting services, consider adding social posting of that content for your clients.

      Some upsells or add-ons are easy to sell as they will be very low costs for your clients, but ultimately can help to create more lucrative cross-sell opportunities down the road. For example, you could create monthly analytics reports for client websites, social media, or SERP rankings. The add-on by itself will be a low cost to your clients, but by reviewing the results periodically, you can use that data to sell your clients on other related services like ongoing SEO, content marketing, social marketing, digital strategy, or website upgrades.

    4. Reduce Over-Servicing and Project Scope Creep

      Providing a high level of service is usually looked at as a positive, and I’m certainly not suggesting that you don’t offer quality service to your clients. But sometimes you can go overboard and provide extra work that your customers should be paying for. Remember, what you do is valuable, so don’t make the mistake of giving away your work for free.

      Project scope creep is an example of “overservicing” that can seriously weaken your agency’s margins. So don’t make the mistake of thinking, “it's just a small request.” Small requests eventually add up, and they also teach your clients to expect more without having to pay for those extra services.

      Clearly define what tasks are in scope and what is out of scope depending on the type of project and make sure you communicate this to your client at the start of each project. Also define a “change order” process and clearly explain how the process will work during the project. Remember, setting expectations early on will reduce the risk of an unhappy customer, while also keeping the project profitable.

    5. Stop Wasting Time On Website Maintenance and Support

      If your agency offers monthly retainers or web management to your clients, but you have to perform monthly or bi-monthly website maintenance, then you are leaving a lot of money on the table. Research shows that the average maintenance hours required for a WordPress website (and plugins) will range between 6.82 to 24.5 hours per year, based on site size and complexity. Based on average hourly development cost ranges, site maintenance could cost your agency $416-$3,185 per website. Lets say your agency has 25 clients. In that case your agency is sacrificing $10,400-$79,625 of potential profits.

      Instead of wasting time on tasks related to technology and maintenance that don’t add value for your business or your clients, consider switching to a content management system, like Marketpath CMS. Marketpath offers a fully managed, maintenance-free CMS platform that provides automatic, non-breaking updates, so you don’t have to worry about spending time on platform or plugin updates and related security concerns. Marketpath also provides unlimited technical support, allowing you to spend even more time on your business. Using a fully managed CMS like Marketpath will allow you to scale your agency’s web development services, while also increasing your margins. 

    6. Develop an Outsourcing Strategy

      Developing an outsourcing plan can support your agency’s growth and profitability in a number of ways. To begin with, outsourcing can allow your agency to flex and handle peaks and valleys in your project cycle without delaying new business during a revenue “peak” or having idle staff during a “valley.” 

      Additionally, outsourcing can allow you to quickly add new revenue streams or services that require either lower value skill sets or new capabilities you are not yet ready to hire staff for. An added benefit is that you can gain expertise related to new services without significant upfront investment.

    7. Create Strategic Partnerships

      Developing partnership programs can provide benefits similar to outsourcing. Last year 69% of marketing agencies reported using partner programs, while 60% used revenue share programs to support their business. Programs like these can 1) add value for your clients, 2) drive sales growth, and 3) increase your profits.

      For example, maybe your agency wants to add a new PPC or digital advertising service, but you don’t currently have the bandwidth or expertise within your staff. Developing a partnership program with a firm focused on online and display advertising might be a win-win. Your agency gets to offer a new service to your clients and the ad partner gets more clients funneled their way. If the PPC firm provides a revenue share for you, such a program can add value for both parties. With a two-way referral program,  they can also benefit from your services (website development, branding, etc.) and provide you with a new revenue stream via their referrals.

    8. Leverage AI

      If you haven’t dedicated time to understanding the ramifications of AI yet, then you need to make that a priority. I don’t pretend to fully understand all the implications of artificial intelligence (AI) on digital agencies yet, but I know it will be significant. 

      I’d suggest you start by researching how AI will impact (and possibly benefit) each of your service offerings and then testing how AI can be used to enhance your current processes. Depending on your agency’s focus, AI can impact various parts of your business including sales prospecting, client research, copywriting and content creation, creative, and more. AI will most certainly be used to increase client value and to improve agency profit margins. The only question is whether it will be used by you.

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    About the Author

    Kevin Kennedy

    Kevin Kennedy, Marketpath’s VP Marketing and Professional Services, has been working on business strategy, digital marketing, and website technology for over 20 years. Prior to joining Marketpath in 2009, Kevin worked for Delta Faucet Company, including roles as Director of E-Business, where he led the company's technology strategy, and Director of Interactive Marketing. 

    Kevin graduated with a B.B.A. in Finance from the University of Notre Dame and received his M.B.A. from Eastern Michigan University. In his free time, Kevin enjoys spending time with his wife, Bridget, and their five children, travel, and various sports activities, while also participating on the non-profit boards for The Children's TherAplay Foundation and Juega Como Campeon.

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