Making The Numbers Work - Pricing and Margins for Profitability
Many agency owners embark on their entrepreneurial journey fueled by their passion, seeking to not only pursue what they love but also gain control, freedom, and financial independence. However, this pursuit comes with inherent risks as they navigate unfamiliar territories such as sales, people management, delivering exceptional products, and identifying opportunities for further growth. To succeed and grow, they must master these skills and embrace the challenges that come with running a business.
In essence, there are lots of plates to spin, and hopefully, at the end of the year, they are paid handsomely for their efforts. Most agency founders equally hope that their business has grown and has become more valuable.
We tune in to Janusz Stabik's session, recorded live at our PPC Agency Book Launch in September 2023.
Highlights and talking points for achieving healthy financials:
Always have 2-4 months of cash in the bank
Carry no debt
Ensure everyone (including you) is paid ‘market- rate’ salaries
Ensure sufficient levels of profitability
Ensure you do ALL of the above
Then.....decide
Running a PPC agency is a rollercoaster of emotions - it's exhilarating, challenging, and sometimes even nerve-wracking. In a single day, you can experience a mix of excitement, fulfilment, and moments that make your stomach churn. PPC agency founders are risk-takers with unique skill sets, driven by their entrepreneurial spirit. However, they rarely have a background in corporate finance, making it difficult to navigate the intricacies of "the numbers."
Last but not least, keep it simple. Follow the recommendations in the chapter by Janusz Stabik (Co-founder, GYDA), which is a culmination of working with nearly 500 agencies across the globe. Use these principles and benchmarks to make better decisions. Keep a really close eye on your Gross Margin, fix your underperformers (or sack them) quickly and put any excess capital to good work.
