Most of the time when an agency owner tells me that they have a profit problem, they immediately assume that it is because their team is too expensive or too inefficient.
Worse, some think that all they need to do is win some more business to get profitability up to where it needs to be.
The truth is that in many instances, the focus on increasing profit for existing clients isn’t targeted correctly and the real problem is that engagements aren’t priced right to begin with.
I’ll explore this more a bit later in this week’s newsletter, but first let’s look at what Jen has rounded up for us this week.
— Chip Griffin, SAGA Founder
Weekly Roundup
Below are some articles, blog posts, podcasts, and videos that we came across during the past week or so that provide useful perspective and information for PR and marketing agency owners. While we don’t necessarily endorse all of the views expressed in these links, we think they are worth your time.
— Jen Griffin, SAGA Community Manager
Latest from SAGA
- Building a Passion-Driven Agency (featuring Emily Allard) (Chats with Chip)
Articles & Blog Posts
- We All Built It This Way (RSW/US)
- Better Marketing Measurement With the PESO Model© (Spin Sucks)
- Unleashing Your Insight From Spam Filters (Punctuation)
- What’s Keeping You Up At Night (And What We Can Do About It (Bureau of Digital)
- Grow your recurring revenue: How to build profitable retainers at your agency (Sakas and Company)
- The call is coming from inside the house. (Anchor Advisors)
Podcast Episodes
- Where the Wild Things Are – Rethinking Social Media in 2025 (Solo PR Pro)
- Growing Your Agency by Stepping Away, with Louise Oliver (The Innovative Agency)
- Recurring Revenue, More Freedom: Why Saas Might Be Your Agency’s Next Move, with Stephen Neville (The Agency Profit Podcast)
- The Digital Employee Experience is the Message (For Immediate Release)
- Greg Bellinger, White Rabbit – What Happens When You Niche Hard and Go All In (Agency Bytes)
- Scaling Human-Powered Chat for Agencies With Ted DeBettencourt (The Marketing Agency Leadership Podcast)
Video
- Jon Tsourakis on Just Ask Jody Live (The Sutter Company)
AI in focus
Is a focus on profitability masking pricing problems?
It’s natural to assume that if your agency isn’t as profitable as you would like it to be, then you need to focus on cost-cutting and becoming more efficient.
Perhaps you think your salaries are too high, you have too many senior team members working on projects, you spend too much on tools or travel.
All of those may true.
And yet the real problem is often not rooted in your expenses, but rather in your pricing.
That’s why reducing spending isn’t always the answer.
Even worse is when you think that just signing more clients will magically resolve the issue. That assumes that much of your team is idle and the new clients will only consume that idle time.
The truth is that if you are not pricing your engagements correctly, cutting costs may make your P&L look better in the short run, but it almost certainly will also lead to lower team morale (because you are asking them to overwork to compensate for poor pricing) or decreased client retention (because you are cutting corners in the level of service you provide).
And if you are not pricing correctly, then adding more clients that are also mispriced will actually make the problem worse rather than better.
So what do you do about this?
It starts with using project budgeting to set prices, track profitability, and adjust future pricing.
The better you get at estimating the amount of work required, the more likely you are to price accurately.
It’s not an overnight solution. You need to regularly check your pricing assumptions and talk with your team to make sure that you are getting it right.
But you also need to know which of your current clients are most — and least — profitable.
You should be aiming to get more clients that look like your profitable ones and solve unprofitable ones by shedding them or finding a way to increase pricing (directly or by reducing scope).
Only after you have resolved that you don’t have a pricing problem should you begin to look at more aggressive cost-cutting measures.
That doesn’t mean you shouldn’t always be looking to control costs, but you need to be careful that you are not going so far as to be penny-wise and pound-foolish.
When you go too far in trimming expenses, it usually means that you are either balancing the business’ books on the backs of your employees or you are short-changing your clients and producing subpar results.
So by all means focus on profitability, but don’t be too quick to assume it is an expense issue because often it is really a pricing problem.
