IS YOUR AGENCY CHARGING ENOUGH?

LET’S LOOK AT PRICING AND FINANCIAL BENCHMARKS…

PRICING

Hybrid Pricing Models

Nearly half of agencies are mixing flat fees, hourly rates, and performance-based pricing.
Why? This captures the value of high-performing campaigns while ensuring predictable revenue.

Higher Rates for New Clients

Published rates and minimum engagements are climbing.
Starting with new clients allows agencies to “anchor” higher prices while keeping existing clients feeling valued.

Incremental Price Increases for Existing Clients

It’s not a blanket raise.
Agencies are carefully evaluating each client relationship and targeting 10-25% increases, sometimes more, with a respectful 3+ months’ notice.

Expanded Service Offerings

Higher-value services, such as full-service packages and specialised creative work, justify these price increases.

Emphasizing ROI

Agencies are leaning into value.
Showcasing case studies, success metrics, and results-based pricing isn’t just good salesmanship; it’s essential.

Adapting to Market Changes

Inflation and rising labour costs are all part of the equation.
Many large agencies anticipate a 12-15% price increase to keep up.

Hours and Rates

• >£120 = wow

• £90-120 = where it needs to be for a prosperous agency 

• £70-90 = can do better 

• <£70 = growth is going to be hard 

A study by McKinsey found that:

...a 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1%. Improvements in price typically have three to four times the effect on profitability as proportionate increases in volume.

PROFIT FOCUSED (EVEN IF PURPOSE-DRIVEN)

Core Capital Target

The fundamental benchmark of a safe and healthy business in financial terms boils down to:

• 2 - 4 months of cash in the bank

• No debt 

• Your pay, your staff - and yourself - market rate salaries 

• Your earnings before interest and tax (EBIT) are greater than 12% if you're a larger agency (50 employees plus)

If any of this isn’t true: your business is at risk and hitting these targets should be your first priority.

Gross Margins (contribution margins)

Simply worked out by how much revenue you get in to deliver your service and how much you pay out to get it done - in salary or contractor fees.

In which threshold does your contribution margin sit?

• >60% = awesome

• 50%-60% = great

• 30%-40% = work to do

• <30% = stop, reflect and act

If you’re hitting above 60% then you’re doing well and will be hitting 25% net profit at the end of the day. Below 30% and you’re just not going to be able to cover your overheads: something needs to change.

EBIT 

EBIT simply means Earnings Before Interest & Tax. 

EBIT is a method that is often used to find the potential profitability of a company. It’s not indicative of the precise profit you’ll accrue (obviously), but it’s a solid benchmark as to how you’re performing against others in the sector AND for monitoring your agency’s trajectory…hopefully upwards. 

How do you work out your EBIT: 

EBIT = Net Income – (Interest + Taxes)

The benchmarks of a healthy EBIT - one which speaks of a successful agency - have shifted upwards since the pandemic as agency owners became more adept at running more profitable businesses. 

A solid EBIT score has been around 25%... but in the last 6 months there has been a lot of downward pressure... times have been tough... and it’s worth stating that some highly successful, growing and profitable agencies are looking at EBIT scores north of 44%. So, there’s always room for improvement. 

Final Thoughts

So..., where do you and your agency stand?

Are you ready to adopt any of these strategies and maximise your value as we head for 2025?