What Data Tells Us About Agency Growth
Are you a data-driven agency?
Do you use data when making decisions for your clients and presenting them with a game plan?
Do you use data when making decisions to grow your agency?
Many agency owners are spread a little thin. With client work and administrative tasks, growing or self-marketing your agency often gets pushed aside. When you do have time to self-market, it’s possible your efforts lack organization and strategic insights. Don’t worry, this problem is so common and I’m here to help you solve it.
Whether you need a growth partner to optimize and increase profitability at your agency like The Campfire Circle, or you need data-driven insights to self-market your agency, I spent a ton of time curating the most important data points about agency growth and they are all in this post.
I hope that once you read the latest agency data, you can implement a data-driven approach to growing your agency.
The Financials
The first step to growing your agency is understanding the potential of the market and identifying benchmarks for compensating your employees. It also helps to know how other agencies manage their finances.
In 2022, the average agency raised its hourly rate. Currently, the average is $175-$199 per hour. Over 35% of agencies in the U.S. are billing their clients at this rate. (Source)
The majority of agencies report that at least half of their revenue is recurring. (Source)
With so many agencies having ten or fewer full-time employees, it’s essential to know how much the average employee adds to an agency’s revenue so that salary can be calculated. The average full time employee brings in $163,000 to an agency’s revenue. (Source)
81% of agencies report that their revenue will increase by 2025. (Source)
In 2023, agencies in the US generated over $55 billion in revenue. (Source)
Actionable insights: Check in on what you’re charging for your services, prioritize recurring revenue like retainer partnerships, compensate your employees accordingly, and know there is a lot of money to be made if you approach growth strategically.
Positioning
Though there is a lot of potential for agencies to do really well financially, the market is also competitive. It comes down to how your agency positions itself by emphasizing what makes you unique and which areas your expertise falls under.
When positioning themselves, more agencies than not own 1-3 niches of industries they specialize in. (Source)
90% of agencies specialize in areas of some form, so that means 10% of agencies are full-service and serve every industry. (Source)
50% of agencies specialize in certain industries, while 33% specialize in their type of services. (Source)
Actionable insights: Owning a niche is crucial. With more agencies than not specializing in specific industries, identifying the niche(s) that are the most profitable and contain your expertise will grow your agency. I know it’s hard at first to cast a smaller net when acquiring new clients; the expertise in specific industries will get you further than trying to serve everyone.
Services Offered
An issue I often encounter when working with my agency clients is determining how many services to offer and which services to offer. There is a delicate balance between trying to do it all while emphasizing your agency's best services.
The average agency owns 5-6 services that they provide. (Source)
In order of most popular to less popular, here are the most popular services that agencies offer:
Strategy consulting
Content marketing
Graphic design
Email marketing
Web design
Social media marketing
SEO
Web development
61% of agencies tailor the services they execute to each client. (Source)
38% of agencies report that paid ads are their least profitable service. (Source)
Actionable insights: Identify six or fewer services that your agency does best. You’ll love the time saved when trying to do everything, and it will be way easier to spread your thought leadership in the services you excel in to attract more business. It’s also important to note that clients respond well when you acknowledge that every brand is unique, so your agency tailors the services and approach to these services for each of your clients.
Marketing An Agency
Struggle with self-marketing? It’s a very common problem. Sometimes, agencies need an organized approach while others simply need the time to make it happen.
In 71% of agencies, the founder or CEO is responsible for marketing and growing the agency. (Source)
50% of agencies prioritize client acquisition over all forms of marketing so they gravitate to lead gen efforts. (Source)
66% of agencies re-invest more than 3% of their revenue into self-marketing. (Source)
Almost half of agencies report not being confident in their efforts to market themselves. (Source)
Actionable insights: With a lack of confidence in their efforts to market themselves and agency owners being spread too thin, a valuable use of resources for agencies is either hiring a growth partner like The Campfire Circle or hiring an individual in-house who is 100% responsible for growing your agency.
Client Acquisition and Retention
Landing new clients is the most obvious factor contributing to agency growth, and luckily, there is some good data that illuminates the challenges and strategies pertaining to client acquisition. Then there is client retention, which is super cost-effective.
The top challenge reported by agencies is client acquisition, with time constraints in second place. (Source)
Referrals are the #1 way that agencies land more clients. (Source)
Referrals are reported to have the strongest ROI by 71% of agencies. (Source)
66% of agencies have less than 25 clients. (Source)
Cold email outreach to land new clients has a negative ROI. (Source)
By far, the number one way that agencies retain clients is through effective communication and transparency. (Source)
70% of agencies report that the average time they retain clients is for two years. (Source)
Actionable insights: Audit your current and past happy clients to understand what about your agency resonated with them and use this knowledge to acquire more clients. Brands love transparency, so just be real, and if any kinks come up in your work for them, just be honest and plan how you will fix any issues.
What Brands Consider When Choosing an Agency
What better way to grow your agency than to enter the minds of your target audience (brands) and learn what they consider when choosing their agency partner?
80% of brands do consultations with two or more agencies before they choose their agency partner (Source)
76% of brands look for third-party recommendations of an agency, aka social proof, when they’re considering an agency to partner with. (Source)
79% of brands report they are willing to pay more for an agency with expertise in their industry. (Source)
Over half of brands partner with agencies when brand growth is their number one priority. (Source)
Actionable insights: Just like your agency wants growth, so do your target brands. With thought leadership efforts, convey your expertise to establish credibility, as brands not only want an agency with expertise in their industries but are also willing to pay more for it. Leveraging case studies is one of many ways to appeal to your target audience.
Next Steps: Identify The Data-Driven Insights That Resonate With You
Depending on your agency's growth goals, some of these data points resonate with you more than others.
The key is not going about agency growth alone. Whether you network with other agency owners, choose an external growth partner, or hire someone in-house, growing your agency likely needs a little help, but at least there are options.
One thing that is clear when analyzing these data points is that thought leadership and third-party endorsements will get you far and establish credibility.
If you want to chat about this data or explore how The Campfire Circle can grow your agency with a free meeting, you can contact us here.
