The Strategies Behind Digital Agencies With High Market Value
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.
1. Smart agencies recognize the need for diversification
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.
2. More than half of these agencies’ revenue is recurring
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.
3. High performance should not rely on founders alone
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.
4. Reputation transcend financial metrics
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.
5. Top performers use data to make decisions
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.
Growing Intelligently and Leveraging Innovations
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.
