Would you like to earn money while you sleep? Most of your clients do. While most product and service companies have diverse ways of generating revenues, professional services firms generally don’t make money unless they’re recording hours on a timesheet. But an emerging crop of innovative firms across the globe are successfully cultivating new revenue streams, diversifying their sources of income, and yes, even making money while they sleep. How do they do it? Here are seven ways you can accomplish this in your own business …
The vast majority of agencies are focused on delivering “overdeveloped services” – services that are widely available, offered by many providers. By definition, if you’re offering the same type of services that thousands of other agencies do, all across the world, you’ll be living in the world of low margins and intense price competition …
When creating an investment portfolio, no reasonable person would put all their money in just gold, just Certificates of Deposit, or just stocks (especially in today’s economic climate). In a marketing communications firm, your client compensation agreements are your most important financial asset. If they are all based on the exact same compensation system – just fees based on hours, for example – it means you’re not diversifying your portfolio …
Consider the deceptively simply question, “Where do profits come from?” When you pose this question to a group of agency professionals, the answers will typically include such things as clients, hours worked, and even efficiency. But the real answer to this question is that profits come from risk …
Advertising agency income “per unit of work” has fallen 40% during a steady 20-year decline. So reports agency consultant and advisor Michael Farmer, whose research demonstrates that agency staffs are being squeezed to deliver increasing workloads at a time when fees are declining faster than costs. The solution to better margins is obviously not to work harder or do a better job of collecting timesheets. To be able to return to the profit margins they had 20 years ago, agencies need new, different revenue streams …
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No activity within an advertising agency gets as much time, attention, and energy as the new business pitch. Countless times I’ve heard agency professionals confess that “We’re at our best when we’re developing new business presentations” and “Our best creative work is usually for new business prospects” …
One view of the future of our business is that increasingly agencies will make the majority of their revenues from the intellectual property they create instead of the hours they work. The “work for hire” model that has persisted for the last half-century is becoming a less and less profitable way to make a living.
As long as agencies are compensated as vendors they will likely be regarded as vendors. The truth is, many agencies are in fact paid like regulated utilities, with clients telling them exactly how much they can earn and what their maximum profit margin can be. That’s far from the spirit of a “marketing partnership” …
