When you think about improving your agency’s profit margins, the default solution often sounds something like, “Let’s raise our prices.” While that might work in some cases, it’s not always the most practical—or smartest—approach. Clients are savvier than ever, and many are already tightening their belts in uncertain economic times. So how do you improve your profitability without scaring off clients or pricing yourself out of the market?
The answer lies in efficiency. By leveraging technology, streamlining your processes, and cutting out unnecessary costs, you can drastically improve your profit margins without touching your prices.
Start with Cost of Goods Sold (COGS)
Profit margins start with controlling your COGS, which should ideally fall between 30–35% of your revenue. If you’re spending more than that to deliver your services, it’s time to reevaluate.
One of the biggest culprits of bloated COGS is inefficiency—manual tasks, redundant work, and high-cost resources that don’t deliver proportional value. Here’s where AI tools can make a game-changing impact.
Leverage AI to Reduce Costs and Improve Efficiency
AI isn’t just a buzzword anymore—it’s a necessity for agencies that want to scale profitably. By integrating AI tools into your workflows, you can save time, reduce costs, and even eliminate certain resource-heavy tasks altogether.
Here are a few examples:
- Descript for Video Editing
If your agency creates video content, Descript is a must-have tool. It allows you to edit videos as easily as editing text. You don’t need a high-cost video editor on payroll when Descript can handle most of the heavy lifting. - Opus for Social Clients
Managing social media content for clients can be labor-intensive, but Opus makes it simple. This AI tool automates content creation, scheduling, and even analytics, freeing up your team to focus on strategy and client engagement. - Syllaby for Video Content
For agencies offering video marketing, Syllaby is a game-changer. It simplifies the process of brainstorming, scripting, and creating video content, saving countless hours of production time. - Flux for AI-Generated Graphics
Need graphics for a client campaign? Instead of hiring a designer for every little asset, use Flux. It generates high-quality visuals in minutes, allowing your team to produce professional-grade content without the hefty price tag.
By incorporating these tools into your workflows, you’re not just cutting costs—you’re increasing output without adding more headcount.
Streamline Your Processes
It’s not just about the tools—it’s about how you use them. The more streamlined your processes, the more efficient your team becomes, and the less money you spend on unnecessary labor.
Here’s how to tighten up your operations:
- Audit Your Workflows
Take a hard look at your current processes. Where are the bottlenecks? What tasks are being duplicated? Map out your workflows and identify areas where automation or delegation could save time and resources. - Standardize Deliverables
Consistency is key to efficiency. Create standard operating procedures (SOPs) for your most common tasks, from onboarding to campaign management. When your team knows exactly how to execute, you save time and reduce errors. - Focus on High-Value Tasks
Not all work is created equal. Ensure your team is spending their time on tasks that directly contribute to client results and revenue. Delegate or automate the rest.
Rethink Your Vendor Relationships
Vendors play a significant role in your COGS, and many agencies don’t revisit these relationships often enough. Take the time to renegotiate contracts, explore alternative vendors, or consolidate services to save costs.
For example, if you’re paying separate vendors for analytics tools, social scheduling, and content creation, consider switching to an all-in-one solution like HighLevel.
Build a Culture of Efficiency
Improving profit margins isn’t just about tools and processes—it’s about mindset. As an agency owner, you set the tone for how your team approaches efficiency.
- Educate Your Team on Costs
Most employees don’t know—or care—how much it costs to run the agency. Teach them about COGS, gross margin, and how their work impacts profitability. When your team understands the numbers, they’re more likely to adopt cost-saving behaviors. - Reward Efficiency
Create incentives for employees who find ways to save time or money without compromising quality. A small bonus or public recognition can go a long way in motivating your team to think creatively about efficiency.
How This Impacts Your Agency’s Value
Here’s the kicker: all of this isn’t just about increasing your profits today. It’s about building a more valuable agency for the future.
When potential buyers evaluate your agency, they’ll be laser-focused on your margins. If you’re running an efficient operation with healthy profitability, you’ll command a higher valuation. On the flip side, if your COGS are bloated and your margins are razor-thin, buyers will see your agency as risky—and they’ll discount the price accordingly.
Final Thoughts
Improving your profit margins doesn’t mean you have to raise your prices or slash services. It’s about running a smarter, more disciplined operation.
Leverage AI tools to reduce costs and increase productivity. Streamline your workflows and eliminate inefficiencies. Rethink your vendor relationships and build a culture of efficiency within your team.
When you focus on these areas, you’re not just improving your bottom line—you’re building an agency that’s scalable, sellable, and built to thrive in a competitive market. And that’s how you win, not just today, but for the long haul.