Ready, Set, Scale

Scaling an agency is no small feat–trust us, we’ve done it a few times 🤠 

It requires careful planning, creativity, and also, a sustainable business model that can support growth without overwhelming or overloading the team. We work closely with firms to build strategic roadmaps that do precisely this. 

By building a detailed strategic roadmap for scaling, agencies increase their earning capacity, improve profitability, and create a clear staffing structure that reduces confusion and stress. A well-defined roadmap also:

• Provides the structure needed to identify and build a leadership team over time
• Offers a clear exit strategy for founders who may want to step back from the day-to-day operations or even exit the firm entirely
• Builds the stability required to launch new service offerings and expand the business in new directions

The summary? Getting the business model right before anything else is imperative when aiming to scale.

From our experience working with thousands of agency professionals, we've uncovered three critical factors that serve as the foundation for every scalable firm:

• A model for delivering service to clients 
• A staffing model for doing the work
• A financial model and pricing structure that can scale with the firm

In this post, we’re breaking down each component to give leaders a head start in creating a scalable agency that can thrive long-term.

Service Model: The Backbone of the Agency

An agency’s service model is essentially the foundation of the entire business. It encompasses the services offered, their execution, and how the firm is structured around them. When building a strategic plan to scale, we always start with the service model first.

Why?

A well-defined service model is critical in shaping the agency's reputation, market differentiation, and overall success. It also influences everything from the type of staff needed to the pricing of services and management of finances. A well-defined service model also enhances the agency’s sales and marketing efforts, making it easier to attract and retain clients.

Key Considerations for Building a Scalable Service Model

When building a scalable service model for clients, there are several key factors we consider:

1. Revenue Mix: What’s the right balance between project-based work and retainer-based work for the agency? There’s no one-size-fits-all answer here. Some agencies thrive on recurring monthly retainers, while others succeed with a project-based approach. Each model has its requirements for success and sustainability, so it’s essential to understand what works best for a firm based on their unique goals.
2. Flagship Services: Will the agency operate with a "flagship" service—one or two core offerings that the firm is known for? Or will the company operate with a handful of services equally weighted in the revenue mix? This decision is crucial not only for marketing but also for staffing and operations.
3. Service Type: Does the agency offer high-touch, bespoke services, or more high-volume, automated services? This distinction is vital for developing an execution plan and determining how to price each service. This decision will also impact the type of investments needed, such as technology, the experience level of staff, custom automation, and more. 

Getting Started with the Service Model

When we work with clients to build a scalable service model, we start by auditing their existing services and identifying what's driving their core revenue. If services contribute less than 10% of the revenue while consuming more than 10% of expenses, it’s time to reevaluate whether they are worth maintaining or what needs to be tweaked to right-size money in vs. money out.

Next, we establish a shortlist list of one to three core services that the firm will prioritize over the next 12 months, establishing the projects and changes required to ensure they are scalable, profitable, and if necessary or desired, take less time from senior leadership to oversee. Once these core services are established, we can focus on standardizing and optimizing them, setting the stage for future growth.

This initial strategy becomes invaluable when it comes time to develop what comes next: the staffing model.

Staffing Model: The Engine of the Agency

With the service model in place, the next step is to develop a staffing model that supports the agency's growth. Staffing is where we see many agencies struggle the most on their path to scalability. We often find that firms are missing core competencies within their teams, which leads to senior leaders—or even the founder—stepping in to fill gaps all the time. This not only stalls growth but often leads to burnout.

Start with Client Delivery Teams

Client delivery teams are the heart of any agency, and getting this part of the staffing model right is crucial for scalability. These are the individuals responsible for executing client work, and without them, the agency wouldn't exist.

When building a scalable staffing model, we consider the following roles within the clients’ delivery teams:

1. Account Leadership: Who is leading the account team and ensuring everyone is aligned? This person is responsible for quality, team direction, and client expectations.
2. Client Engagement: Who is managing the client relationship and keeping the project on track? This includes both relationship management and project management.
3. Strategy: Who is driving the strategy for the client? This person ensures that the agency's work is aligned with the client's goals and is delivering results.
4. Execution: Who is responsible for executing the work and delivering the results? This role is critical for producing the deliverables that the client expects.

Depending on the agency size, you may not have a separate person in every role, but it is genuinely challenging for one person to hold all of them. 

Other Staffing Considerations

The type and number of non-billable (a.k.a. not doing client work) team members an agency needs will depend on the size and complexity of the firm. A small, five-person firm may only need no or very minimal non-billable support, like a part-time bookkeeper or occasional contractor help. On the other hand, a large agency with 500 employees will require entire teams dedicated to operations, HR, marketing, sales, and leadership.

When developing a staffing model for clients, we consider:

1. What is the staffing model needed today to effectively deliver client work?
2. What is the staffing model needed one to three years from now to scale the agency to the next level?

These questions help build a staffing model that not only meets the agency’s current needs but also supports their growth.

Financial Model: The Fuel for the Agency's Growth

The final component of a scalable agency is the financial model. This includes how the firm’s services are priced, how costs are managed, and the plan for profitability. A strong financial model is essential for sustaining growth and ensuring that the agency can invest in its future.

Pricing for Profitability

One of the most important aspects of a scalable financial model is pricing. Agency’s need to price services in a way that accounts for all the hard costs of execution, including team salaries, tools, and technology. It’s also important to ensure that pricing allows for healthy delivery margins (more below).

Key Financial Metrics to Monitor

When building a scalable financial model, we identify the top metrics regularly monitor, such as: 

1. Delivery Margins: What are the delivery margins on client work? This is the revenue left after subtracting the hard costs of execution. A common mistake is to assume that delivery margin equals profit, but overhead costs like marketing, sales, and operations need to be factored into this calculation as well.
2. Revenue Potential: What is the potential revenue of the current team? This is based on the ideal revenue targets for each team member, given their total billable hours available and billable rate. One of an agency’s ongoing goals should be to close the gap between the revenue the team is currently managing and the amount they need to manage to be fully utilized.
3. Overhead Efficiency: What percentage of the gross profit is going toward overhead, and how efficiently is each overhead line item being used to grow the business? For example, if an agency invests 10% of gross profit into marketing, are those dollars working efficiently enough to justify the expense?

Building a Plan for Profitability

With these metrics in mind, we can work with agency owners to establish a plan for increasing profitability and making strategic investments in the firm’s growth. This might include setting aside funds for future hires, investing in new technology, or expanding service offerings.

To Wrap It Up

Scaling an agency isn’t just about growing the client base or hiring more people—it’s about building a sustainable business model that can support long-term growth and increase the firm's value over time. We’ve seen firsthand that when agencies focus on the key components of a scalable agency model—the service model, staffing model, and financial model—they can create a roadmap for growth that allows the firm to thrive without burning out the team.

If you’d like to learn more from the Advocation team on best practices for digital, PR & marketing agency teams, follow us on social media–Instagram, LinkedIn, and YouTube.