Agency founders are vital to their businesses, driving culture, strategy, and growth. Yet, determining fair compensation is often a challenge.

Many agency owners wonder: Am I paying myself enough? Should I be earning less and reinvesting more? How do I compare with my peers?

In 2024, Productive, a leading agency management tool, surveyed 161 agency founders worldwide to shed light on these questions. The findings revealed both the complexities of compensation and the satisfaction many owners feel about their earnings.

The survey drew responses from a diverse group:

Compensation often correlates with revenue, number of owners, years on the market, and company size. The more stable an agency is, the owners start to increase their salaries over time. 

Despite concerns about fairness, the majority of owners earned at or above industry averages. Still, their perception of their own compensation in comparison with others is that they earn below the average (39%) or slightly below average (25%). Only 9% of agency owners think they make more than their peers.

There’s no universal formula for setting owner compensation. However, the following steps can help:

By addressing these issues, agency founders can align their financial goals with personal satisfaction—achieving the happiness they deserve.

Although compensation decisions can be complex, the key lies in finding a balance: ensuring personal income while supporting the agency’s growth. With informed strategies and clear benchmarks, agency owners can confidently value their contributions and enjoy the rewards of their hard work.

You can download the full report here.

A few weeks ago, part of our team headed over to London for The Agency Collective’s annual Future Proofing Your Agency conference. This year, the overall theme was agency resilience. 

The Agency Collective is a bustling community built up of hundreds of independent creative agencies based throughout the UK. A good portion of its members joined the event to candidly share experiences and learnings with peers.

Resilience was tackled through all different angles, from business development to implementing diversity and inclusion efforts at the workplace.

The one-day event was opened by speaker, mentor and coach Marcus Thomlinson, who reminded us all: “You are what you think the most”. This set the stage for a day filled with positivity, motivation, and ideas on how to move forward in the agency space.

Generally speaking, it’s clear that UK agencies have been struggling to swim and thrive—just as equally as in all other parts of the world.
A year and a half into the economic downturn and agency folk are still sleepless over stale pipelines, which makes events of this type paramount for gathering insights from the wider agency network.

Embracing change, however simple of a concept it seems—was one of the main takeaways from a number of Agency Collective peers. Challenge your marketing strategies, your sales processes, your pricing model, and how you nurture your relationships with existing clients.

Katie Street, MD and founder of Street Agency, doesn’t shy from her life story, which in itself displays extreme resilience. She emphasized how showing up every day (on LinkedIn), helping clients understand how to buy from you, and embracing the inbound, outbound, and nearbound opportunities within your network can fuel growth.

For UK agencies, EDI isn’t an optional extra. Kindness and empathy shown towards colleagues of different life paths is a must. As per Mo Kanjilal, Co-creator at Watch This Sp_ce, diversity and inclusion aren’t something agencies can learn (or adopt) in a one-hour training session. A simple example of being more inclusive towards neurodiverse peers is sending interview questions ahead of the meeting so that they have more time to formulate their answers.

In his own, very personable way, Barrington Reeves, Creative Director and Founder of Too Gallus, shared his way off the beaten path. His take on using authenticity to find your agency’s niche is to find the flame that lives within your business.

Not all hope is lost when it comes to growth. Constantly optimizing processes and selling intelligently productized services were what built and sold Jellyfish last year. Rob Pierre, former co-founder of the creative giant, now an investor and advisor, made and sold what was allegedly the biggest independent agency exit in the history of the UK.

His inspiring take on creating a team that was as scalable as a vector image included dozens of strategies that led him to building a global team of 2,200 employees. All that, in only 19 years.

It’s unclear just how long this economic plunge will rule, and UK agencies are not the only ones affected. This is a global challenge for the entire industry. Creative service businesses need to ride the wave of change, instead of waiting for better circumstances of the past to return.

To maintain stability, intentionally growth and increasing profit margins are the two main pillars. As a North Star, what’s paramount to have at your fingertips is real-time data on:

According to an article published in AdAge, the agency landscape is about to get flooded with mergers and acquisitions.

Just recently, Omnicom bought Flywheel Digital, and Globant now owns a majority in Gut, to name a few.

Madison Alley’s Michael Seidler is convinced this is just the beginning of a more significant trend in the agency industry. And he is not alone – AdAge spoke to 21 executives who agree with his prediction.

But what does that mean for agency owners around the world who are looking to sell? Andrew Essex said agencies specializing in ad tech, influencer marketing, design, performance marketing, and AI are in demand.

Additionally, Marla Kaplowitz said that “high-level data and tech skills especially related to AI and specifically, generative AI, as well as influencer marketing” are particularly interesting.

If your agency falls into that category, it’s useful to know how much you could ask for it – a tool like the Agency Valuations Calculator will calculate your approximate market value.
However, for some, selling is just not an option, and they might go in the opposite direction and merge with or even acquire a different agency. And surprisingly, it’s not always the big players that acquire independent agencies.

One of those people is Todd Neinkirk from Four Kitchens, an agency specializing in website building. Speaking on the Agency Mastery podcast, he said that while it may seem impossible initially, growing an agency through an acquisition was the right thing to do. Todd took a risk and bought the agency from his then-partner. It was a bold move, but it paid off quickly as the business became profitable soon after.

There is no magic formula, argues Todd, but the combination of leadership changes, improved marketing, and finding the right niche was crucial for the agency to get back on track.

In fact, the success of this acquisition made Todd approach an agency in Costa Rica with a proposal to acquire them, which helped with developer turnover, a significant problem for small to medium agencies.

The market will certainly look interesting in 2024: Some agencies will benefit from being guided by a larger organization and gain access to new markets, challenges and clients. On the other hand, merging with an another agency or acquiring is a an increasingly realistic possibility for medium sized agencies.

To solve a problem, you need to name it first, right?

Now, you’re probably thinking: “Yeah, sure, but there are hundreds of problems to solve at my agency.”

We get that. Extinguishing consequences of scope creep. Balancing schedules. Keeping the cash coming in. What to tackle first is the real question.

But let’s zoom out for a moment and take a look at the big picture. The biggest problem for any agency to solve is how to continue to thrive. So the common denominator of staying healthy as an agency is data that will help you move forward as a business.

Now let’s look at some key reports that agencies need to keep at their fingertips, broken down into three time frames – past, present and future.

When was the last time you had mental space to look into past data on the work your agency has been delivering? Perhaps last quarter. Maybe even 6 months ago. If it was the year’s end, you were probably focused on P&L statements. But did you think to zoom into profitability by client, service, or industry? Diving into reports that cover profitability, utilization and forecasted vs. actual revenue can help you better address issues that occurred—and decide how to avoid them in the future.

Getting in touch with your finance team to get a pulse on how your agency is doing – financially speaking – is a thing of the past.

Assuming your teammates are tracking time on a daily basis, you can see the financial state of your client work in real time, within a couple of clicks. Reports that show you budget burn, or, on the flip side – profitability per project – can help make faster decisions and facilitate conversations with clients if necessary. Utilization by teammate can usually indicate how well your projects are going in the present, which team or person is overutilized or who needs more work.

Forecasted revenue can be looked at globally, sure, but to understand where your resources will be booked, where you need to sell (or hire) more, and learn where to invest more or less effort, try scenario-building. What figures do you plan on seeing as your forecasted revenue, forecasted profitability and forecasted utilization in 6 or 12 months? Once you have those goals in mind, reverse-engineer to understand your next steps.

Join Bold on Slack to continue the conversation on reports that can help your agency thrive.

In the dynamic landscape of digital agencies, the pursuit of growth, profitability, and market relevance has never been more paramount. 

Competition is unwavering. Promethean Research estimates that over 45,000 digital agencies exist in the United States and Canada. That number has grown by 54% from 2018 to 2023.

In reality, setting up shop doesn’t cost a fortune. However, establishing a profitable and acclaimed creative services business is the fruit of many years of making the right moves. 

A closer look at top-performing agencies, particularly those with revenues exceeding $1M USD, unveils a blueprint for success. 

We bring you a few of the mutual features of these agencies.

They ensure that no single client holds disproportionate influence over their financial destiny. The top performers (57% out of 796 agencies) stated that less than 10% of their revenue wasrepresented by their largest client. Ideally, to minimize risk, an agency’s biggest client should bring in less than 25% of yearly revenue.

More than half of the business owners and managers that participated in the questionnaire (51.5%) revealed that over half of their income is recurring. This is a testament to their ability to weather uncertainties, and nurture long-term relationships with clients.

Many wonder if agencies can truly thrive beyond the shadows of their founders. When looking into business development sophistication and the level at which founders take part in business development processes, out of the businesses with the highest market valuations, 33.3% of these agencies had an established BD team that owns sales, with the support of founders.

On the other hand, when looking at the entire sample (close to 800 agencies), 35.3% said to have had a BD strategy and team in place, but to still heavily rely on founders. Out of the same sample, 26.5% had no business development process at all — i.e. they solely relied on founders to acquire new work.

In the intangible realm of agency valuations, reputation reigns supreme. When asked how they would rate their agency’s brand reputation, over 52% said they were mostly or somewhat known on the market. At the same time, over 14% claimed to be award-winning agencies while just over 9% said to be globally recognized.

It’s not surprising that 47.6% of the top performers use a single work management system to integrate all their business data. Using one tool helps optimize operations and improve forecasting and planning their futures.

The path to enhancing market values lies in strategic growth, risk mitigation, and relentless pursuit of operational excellence.

And while no agency is like the next, still — there are some common traits that yield higher market value. 

Try the Agency Valuation Calculator to get an estimate of your business today.

Let me quote the former founder and CEO of a successful agency which I’ll leave anonymous this time around: “At some point – even if you don’t plan on selling your business – you’d like to know how much this thing you’ve built is worth.”

Which begs the question: do you know the market value of your agency?

If not, you should. For a number of reasons, but I’ll mention two.

One reason is to understand your agency’s scalability and growth potential. Another is to leverage the knowledge of its value.

From January to June 2023, agency business valuation data was gathered from 796 agencies through a questionnaire launched by Productive. The detailed survey included 13 questions on revenue, EBITDA, growth, business development and data consolidation.

Though the research will be fully published in fall 2023 (stay tuned), a few interesting findings arose when looking into the top 5% of agencies with the highest valuations and annual revenue above $1 million USD:

Creative service businesses are clearly looking into ways to diversify clients to secure cashflow, while top performers are aware that client acquisition opportunities won’t fall from the sky.

We know, it’s all easier said than done. At some point, though – that strategy workshop will come, and getting an estimate of your agency’s business value can shape the future conversations you’ll have, as well as the course of your business growth.

Some of the fundamental questions agency owners ask themselves when entering the world of valuations are:

When asked what advice he would give to an agency owner if they want they want to build their agency with a mind of selling it in the end, Michael Seidler, CEO of Madison Alley Global Ventures says:

There’s enormous interest in mergers and acquisitions in the digital agency space at this moment. Does your agency have a strategy in place for enhancing its market value?

If you’re interested in taking a first step into the realm of agency M&A, fill out the Agency Valuation Calculator. Once you get an estimated valuation, let us know your thoughts and feedback. 

In the agency world, lead generation is a type of art.

Economic crises have been rolling in and out like tidal waves. AI-generated content has brought in a lingering obsession with harnessing its full potential. Still, an agency’s ability to reliably and predictably generate new business is crucial.

Often, agencies don’t have a robust enough system, team or organization behind their business development processes.

From January to June 2023, 796 agencies filled out our questionnaire on business valuations. Although the findings will be fully published in September 2023 (watch this space), we bring you a peek into the global state of agency bizdev maturity.

Namely, when these agencies were asked to rate the level of sophistication at which their business development strategy stands, our team found that:

But what was found in common with the top 5% of agencies with the highest valuations and annual revenue above $1 million USD?

This past June, Blair Enns, founder of Win Without Pitching held a webinar on unclogging stuck pipelines. One key point he mentioned was that for agencies to move stale deals forward, it’s important to understand why the deals got stuck in the first place.

Karl Sakas, who has personally advised hundreds of agency leaders across the globe, recently talked about cultivating a robust pipeline in a challenging economic climate in this Agency “Office Hours” Q&A. He highlights the significant shift in sales cycles, including agencies seeing delays grow from 4-6 weeks to 4-6 months. To combat this issue, Sakas notes that larger agencies are dedicating people and budget to self-marketing, including doing paid ads. He advises agencies to use a higher-value lead magnet to connect with potential clients, and to consider a “Paid Discovery” offer to convert leery buyers.

So what are some bizdev methods that have proven reliable?

Then there are the myths…

Acquiring new business is difficult, but it is the lifeblood of agencies. Research shows that agencies still struggle with putting their sales teams together, working systematically, and becoming less dependent on their founders. But those who succeed – thrive better, grow faster, and end up getting higher valuations.

As an agency, first you’ll determine the scope and price of a project. Then you’ll deliver the work. After that, you expect to get paid… but the money you earned doesn’t come so fast, does it?

Cash flow is the lifeblood of your agency. It fuels future growth, enables agencies to take on new projects and hire new talent, plus invest in the tools and technology you need to stay competitive.

It may come as a surprise, but many agencies have trouble maintaining a steady cashflow, simply because they aren’t getting paid quickly enough. Somehow, agencies avoid being assertive when it comes to billing and repeatedly fall into the trap of not being able to forecast their future.

Why, though?

The main reasons:

Big brands had a tendency of paying out 60 days upon the delivery of a project. At best, agencies would see their cash a month after their work was done. At worst – you’d get paid up to 90 days after you completed a project.

Many agencies mention that cash flow and expenses are hard to predict at times, and this negatively impacts resource planning and hiring. Now, with the industry’s expertise more in demand than ever, it’s time to get paid faster.

To avoid dry periods, here are a few things to consider and some questions you can ask yourself already today:

By promptly following up with invoices and payment agreements, you’re not only ensuring a steady stream of income – this also demonstrates your agency’s commitment to clients.

During economically unstable times, certain metrics are focused on more than others. Agency owners get into survival mode and tend to keep a close eye on 5-10 financial reports that will give them a pulse on their business.

But financial reports aren’t the only thing to track closely when times are volatile.

One of the main assets of any agency is its people: their creativity and productivity.

One metric you’ll be laser-focused on is utilization. You’ll be looking into the amount of billable time you can get out of the total available time of an employee, because in crisis mode, it’s more crucial than ever to make the most out of each budget. Right?

Well, yes – and no.

Yes, because of course, you should always aim to run a profitable business.
No, because if you only focus on squeezing the most out of a teammate, chances are that dissatisfaction, decline in productivity, and potential burnout could be around the corner.

Here are a few important questions to answer when looking into utilization reports:

Ideally, utilization rates are basically 70-80%. That’s an average that can be seen across many different types of agencies. It means that teammates are allocated to enough work, and are getting some time to work on themselves professionally, i.e. take time to explore and research.

If you’re noticing a constant 90%, that’s already alarming. Similarly, over 90% utilization often indicates that your teammates are already overworked.
Reaching 100% utilization can indicate that the teammate is even overbooked.

But here’s something that may come as a surprise. According to one of the most recent agency industry reports by Promethean Research, which included over 45,000 digital agencies since 2015, only around 35% of agencies track billable utilization.

According to the same report – only around 10% track forecasted utilization. That’s a very small number of agencies looking into their future.

So first things first. If your agency’s not tracking utilization – what’s stopping you?

Once that’s set, some solutions to keep your team’s workloads as balanced as possible are:

To conclude, here are a few questions for you:

Let’s talk about one thing we all like: getting paid what our work is worth.

Retainers aren’t easy to win.

Pitching for free is hopefully a habit from the industry’s past.

Chasing payments is… not fun.

Most importantly, certain workflows get repeated time and time again. Then why not bundle and sell them as products?

Service productization is increasing. Agencies are packaging deliverables at fixed costs and set timelines to provide more value to clients and save time on determining project scope, resource needs, timing, and pricing.

As CEO of Huge, Mat Baxter stated for The Drum:

A recent BenchPress report included pricing insights from over 600 agencies based in the UK. The most common pricing model turned out to be blended rates.

This unfortunately isn’t the best option out there for agencies because it can easily decrease profit margins when clients, for example, require more senior staff.

Standardized service packages help agencies improve capacity planning and streamline processes across their wide range of services.
A productized approach allows agencies to replicate successful offerings, serving multiple clients efficiently and effectively managing client requests.
Perhaps it time to spearhead a smarter pricing model to:

Do you agree that productized pricing could be a big part of the agency industry’s future? Do you think that your clients are ready to collaborate through such a model?

We’d love to hear your thoughts.