Profit margins can make or break your marketing agency. To ensure long-term success and sustainable growth, agencies need to implement smart financial strategies. The good news? There are several best practices that can help you boost your profit margins, stay on top of your numbers, and keep expenses in check. Here’s a breakdown of four essential steps to maximize profitability in your agency.
1. Hire a Bookkeeper Who Understands Agencies
First and foremost, you MUST have a good bookkeeper—but not just any bookkeeper. You need someone who understands the ins and outs of how a marketing agency operates. Your bookkeeper should be skilled in properly tracking your cost of goods sold (COGS) versus operating expenses. These two areas require different approaches, and mixing them up can throw off your financial picture.
Cost of goods sold includes all the expenses directly related to delivering your services, such as labor, software subscriptions, and freelance payments. Operating expenses, on the other hand, cover the general costs of running your agency, like rent, utilities, and marketing expenses. Having a bookkeeper who can accurately distinguish between these two categories ensures that you have a clear view of your financial health and can identify areas where you need to cut back or invest more.
Without accurate financial records, it’s impossible to truly understand your agency’s profit margins. So, invest in a knowledgeable bookkeeper who is experienced with agencies and knows how to track your finances with precision.
2. Bring in an Outsider to Analyze Your Numbers Twice a Year
While having a solid bookkeeper is crucial, it’s also important to bring in an outsider to analyze your numbers at least twice a year. Why? Because an outside perspective can reveal things you and your team might miss. As the owner or CEO of your agency, you may be too close to the business to spot inefficiencies or hidden expenses that are eating into your profits.
An outsider—whether it’s a financial consultant, accountant, or business coach—can offer objective insights and find ways to optimize your operations. They can pinpoint areas where you’re overspending, suggest more efficient processes, and even provide ideas for how to improve revenue streams. Often, agency owners are surprised by how much an external reviewer can uncover that was overlooked in the day-to-day running of the business.
By regularly bringing in an external expert, you can ensure that your agency stays on track financially, avoid costly mistakes, and continually improve your profit margins.
3. Outsource Roles to Reduce Labor Costs
With advancements in technology and remote work, outsourcing roles has become one of the most effective ways to reduce labor costs and maximize profit margins. It’s no longer necessary to hire all your team members locally. In fact, you can find highly skilled talent from around the world at a fraction of the cost.
For example, if you need graphic design, content writing, or project management support, you can often find top-notch professionals in countries where the cost of living is lower, meaning their rates are significantly less—sometimes up to 30% of what you’d pay for similar talent in the U.S. or Western Europe.
Outsourcing doesn’t mean compromising on quality. With platforms like Upwork and Fiverr, you can vet freelancers and remote workers thoroughly, ensuring they meet your agency’s standards. By tapping into a global talent pool, you can keep labor costs down while maintaining (or even improving) the quality of your work.
4. Implement the Profit First Method
The Profit First method is a financial management strategy that flips the traditional business model on its head. Instead of taking profit last (after paying expenses), this method encourages you to take profit first. It’s a simple but effective way to prioritize profitability and ensure your agency is consistently generating a healthy bottom line.
Here’s how it works: Every time you receive revenue, you immediately allocate a portion to profit. This ensures that no matter what your expenses are, profit is always prioritized. The remaining funds are then used to cover operational expenses, payroll, and other costs. The beauty of this system is that it forces you to live within your means. If your expenses exceed what’s left after profit is taken out, it’s a clear sign that you need to tighten up operations or cut back on unnecessary spending.
Many agency owners who have implemented Profit First find that it transforms the way they run their businesses. It instills financial discipline, reduces wasteful spending, and makes profitability a non-negotiable part of the business model.
Conclusion
Maximizing profit margins in your agency doesn’t happen by accident—it requires intentional financial strategies and discipline. Start by hiring a skilled bookkeeper who understands the nuances of agency finances, bring in an outsider to review your numbers regularly, and take advantage of outsourcing to reduce labor costs. Lastly, adopt the Profit First method to ensure that profitability is always prioritized.
By following these best practices, you’ll not only boost your profit margins but also create a financially sound and scalable agency that’s built for long-term success.