Scaling your agency is the ultimate goal for many business owners, but growth without profitability is a disaster waiting to happen. It’s not enough to generate more revenue—you need to ensure that every step forward adds value to your bottom line. Based on lessons from Facts Not Feelings, this article dives into the key principles for scaling profitably and avoiding the common mistakes that derail agencies during growth.
1. Know Your Margins and Protect Them at All Costs
Profitability starts with understanding your numbers, and two of the most critical are gross margin and EBITDA. Gross margin tells you how efficiently you’re delivering services, while EBITDA (earnings before interest, taxes, depreciation, and amortization) reflects your overall financial health.
The danger many agencies face during growth is losing sight of these metrics. As revenue increases, costs often balloon, eroding profitability. A growing agency must keep its gross margin above 70% and aim for an EBITDA of at least 20%.
Example: In Facts Not Feelings, I share the story of an agency owner who doubled their revenue but struggled with profitability. Why? They overstaffed their team and didn’t track COGS (cost of goods sold). Once we streamlined operations and refocused on gross margin, they went from barely breaking even to a thriving business in six months.
Key Takeaway: Track your margins relentlessly. If you don’t know your numbers, you’re flying blind.
2. Build Systems That Scale
As you grow, chaos becomes the enemy of profitability. Without clear systems and processes, an agency can quickly become overwhelmed, leading to inefficiencies, mistakes, and unhappy clients.
In Facts Not Feelings, I compare a disorganized agency to a chaotic playground. When you’re small, you can get away with a lack of structure. But as you scale, you need the precision of an NFL team. Every player must know their role, and every play must be executed flawlessly.
Steps to Build Scalable Systems:
- Document Everything: Create standard operating procedures (SOPs) for key processes like onboarding, project management, and reporting.
- Automate Where Possible: Leverage tools to streamline repetitive tasks and reduce manual errors.
- Train Your Team: Ensure everyone understands and follows the systems. Regularly review and update processes as needed.
Key Takeaway: Systems create consistency, which leads to scalability. Without them, growth will amplify problems, not profits.
3. Choose Your Clients Wisely
Not all clients are good for business. During periods of growth, it’s tempting to take on every client that comes your way. But difficult, low-value clients can drain your resources and hurt profitability.
In Facts Not Feelings, I emphasize the importance of having a clear client qualification process. Identify your ideal client based on profitability, alignment with your strengths, and the likelihood of long-term success.
Example: One agency I worked with wasted resources on small, demanding clients that didn’t align with their service model. By narrowing their focus to high-value clients who needed their core offerings, they doubled their profitability without adding a single new employee.
Key Takeaway: Scaling doesn’t mean saying “yes” to everyone. Focus on the clients who bring value and align with your strengths.
4. Make Leadership Accountable
As your agency grows, leadership becomes a bottleneck—or a multiplier. Every executive must own their key number and align with the company’s vision and values. Without accountability at the top, inefficiencies creep in, and profitability suffers.
What is a Key Number?
Each leader should have one metric they’re directly responsible for. For example:
- Operations: Cost of Goods Sold (COGS)
- Customer Experience: Churn Rate
- Sales: New Revenue
- Marketing: New Appointments
- Finance: Net Income or EBITDA
When leaders take ownership of their numbers, it’s easier to identify issues and course-correct before they become major problems.
Key Takeaway: Scaling profitably requires a leadership team that’s aligned, accountable, and focused on measurable outcomes.
5. Make Decisions Based on Data, Not Feelings
One of the central lessons in Facts Not Feelings is the importance of data-driven decision-making. As you scale, relying on gut instincts or emotions can lead to costly mistakes.
For example, a common mistake is over-hiring based on “feelings” that the team is overwhelmed. Instead, look at data like project capacity, revenue per employee, and profitability per project. Let the numbers guide your decisions.
Key Takeaway: Growth requires discipline. Trust the numbers—they’ll tell you the truth every time.
6. Avoid the “Grow at All Costs” Mentality
Rapid growth can be seductive, but if it comes at the expense of profitability, it’s a recipe for disaster. Scaling isn’t just about increasing revenue; it’s about maintaining healthy margins, delivering results, and building a sustainable business.
Example: In Facts Not Feelings, I highlight the story of an agency owner who chased growth by adding services and hiring too quickly. The result? Overhead exploded, and they lost focus on their core offering. By scaling back, streamlining operations, and focusing on profitability, they rebuilt a stronger, more sustainable agency.
Key Takeaway: Growth for the sake of growth is dangerous. Focus on profitable, sustainable growth instead.
Final Thoughts: Scaling the Right Way
Scaling profitably isn’t easy, but it’s possible with the right approach. Know your margins, build systems, choose your clients wisely, hold your leadership team accountable, and let data guide your decisions.
Remember: scaling isn’t about working harder—it’s about working smarter. When you focus on profitability and discipline, you’ll not only grow your agency but create a business that thrives at any size.
Let your growth story be one of clarity, not chaos.