How To Find Profit For Your Agency During Lean Times

January 23

We have good news if your agency needs help staying afloat and generating enough revenue. Revenue is likely only half of your cash flow equation - the other half is expenses.


It's much easier to cut expenses than it is to create revenue. Any owner can effectively go through expenses and decide which are "nice to haves" vs. "have to haves."  


To help with the decision-making, print out your G/L details and go line by line. Do you see products or services you can live without? Subscriptions you've signed up for but forgot about and no longer use? Downgrade, turn off, or eliminate them.


Do you need help determining exactly which expenses to eliminate or prioritize? Treat your costs like a closet clean-out; if you haven't worn it in the last three months, you don't need to keep it in your closet. Don't hang on to extra baggage for the sake of "if this one situation happens..."


Another area your agency can look at to cut expenses is long-term agreements. While discounts usually come with long-term commitments, they can limit your flexibility to reduce lifetime costs. 


If you have long-term contract renewals, it's best to consider ways to eliminate, negotiate a lower price, or extend with shorter terms until you can determine how vital the service is.


The area no one enjoys looking into is capacity.


The best way to determine if you have excess capacity is to calculate your employee utilization rate. Your agency should target utilization rates of 75% - 80%; anything significantly less would indicate a drain on profits. No owner likes to reduce headcount, but failing to act soon enough on excess capacity is the number one drain on profits we see with clients.


Upsourced can provide additional choices to increase your agency's profitability without generating more business, but only you can be honest about which products and services you need to function.


For a deeper dive into how to keep your agency profitable during tough times, check out our Creative Agency Survival Guide: Recession Edition.


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