Your agency might be making money, but where is it all going? You work hard, clients are happy, and revenue looks decent, yet somehow, the profit at the end of the month feels underwhelming. Sound familiar?
Many agencies struggle with profitability, not because they don’t generate revenue, but because they don’t track or optimise their expenses. Running an agency isn’t just about delivering excellent work, it’s about making sure you’re not haemorrhaging cash in the wrong places. Let’s break down where the money goes and how to spend smarter, not just less.
Breaking Down the Costs of Running an Agency
🔹 Direct Costs: The Price of Doing Business
💰 – Salaries and Contractor Payments – Your biggest expense, and rightly so. But are you overstaffed? Are you paying for skills you don’t need full-time?
💰 – Software & Tools – The industry loves its tools, but do you need all of them? Are you paying for overlapping functionalities?
💰 – Service Execution Costs – Paid media, stock images, video production, hosting – all necessary but easy to overspend on.
🔹 Operational Costs: Keeping the Lights On
💰 – Office Rent, Utilities, Insurance – Many agencies hold onto expensive office spaces they don’t truly need. Remote and hybrid models can save thousands.
💰 – Admin Software – CRMs, accounting software, communication platforms. Essential, but is everything actually being used?
💰 – Marketing & Sales Expenses – Client acquisition is crucial, but are you tracking ROI? Are you pouring money into campaigns that don’t convert?
💰 – Employee Perks & Benefits – Great for retention but do they align with what employees actually value?
💰 – Training & Development – Important, but are courses actually making a difference?
💰 – Underutilised Subscriptions – If you haven’t used it in 90 days, cancel it.
Where Agencies Overspend
🔸 Too Many Software Tools
Agencies have a habit of hoarding SaaS subscriptions. It starts with one, then another, and before you know it, you’re paying for 20 tools, half of which do the same thing. Do a software audit:
✅ List every tool you pay for
✅ Identify duplicate or underused subscriptions
✅ Adopt a “one-in, one-out” rule for new tools
🔸 Overstaffing or Poor Hiring Decisions
Many agencies hire too quickly when workloads increase, only to find themselves overstaffed when things slow down. The key is balance:
✔️ Use freelancers for fluctuating workloads
✔️ Hire full-time when the demand is consistent
✔️ Keep core expertise in-house, outsource everything else
🔸 Expensive Office Space & Unnecessary Overheads
It’s 2024. Do you really need that fancy office? Many agencies are switching to remote or hybrid models to cut costs. If you must have an office:
💡 Consider co-working spaces
💡 Sublet unused space
💡 Negotiate rent reductions
🔸 Inefficient Marketing Spend
Marketing spend can spiral if you’re not tracking ROI. Stop blindly throwing money at ads and lead gen without understanding what works.
📈 Track conversion rates rigorously
📈 Focus on high-ROI channels
📈 Kill campaigns that don’t deliver
How to Optimise Costs Without Cutting Too Deep
🔹 Zero-Based Budgeting
Instead of just trimming costs, rebuild your budget from scratch. Ask yourself: if you were starting today, would you spend money on this? If the answer is no, cut it.
🔹 Renegotiating Contracts & Subscriptions
✅ – Vendors rarely offer discounts unless you ask. Negotiate pricing on software, office space, and contractors.
✅ – Review contracts every 6-12 months.
✅ – Consider paying annually for software (often cheaper than monthly).
🔹 Outsourcing & Automation for Cost Efficiency
✅ – Automate repetitive tasks to save on labour costs.
✅ – Outsource non-core activities (admin, payroll, data entry) instead of hiring in-house.
Final Thoughts: Spend Smarter, Not Just Less
Trimming expenses doesn’t mean cutting corners. It means spending wisely. Take a day this month to audit your costs, slash the waste, and reinvest where it actually counts. Profitability isn’t just about making more money, it’s about keeping more of what you earn.