Is your digital marketing agency failing to see an increase in profitability despite a surge in expenses?
You’ve likely reached your revenue ceiling, which is the maximum amount of revenue you can gain each month while following your current business practices. It’s time to change up your strategies to boost revenue and profitability.
At the Seven Figure Agency, our agency coaches help digital marketing agencies reach their fullest potential. These are our expert strategies to overcome revenue plateaus.
Understand the Revenue Ceiling Formula
Numerous variables contribute to your agency’s revenue and profitability. Before you can work on overcoming the revenue plateau, you need to understand what has you stuck in the first place.
The revenue ceiling formula can help you inspect the variables that affect your revenue. This formula includes three main components:
- Average revenue per client, or the revenue you gain per month from each client
- Churn rate, or the percentage of clients lost each month
- Lifetime customer value, or the average total revenue you gain from each client
To calculate your revenue ceiling, divide your average revenue per client by your churn rate. This will leave you with your lifetime customer value. Multiply that figure by the number of new clients you acquire per month. The resulting figure is the maximum amount of revenue you can expect to achieve in a month under your current business model.
Because your average client revenue and churn rate directly contribute to your growth plateau, it makes sense that adjusting these metrics will increase your revenue.
Reduce Churn
Even the most successful digital marketing agencies experience some level of churn, where clients decide to end their services. But you should always be working on ways to reduce your churn rate, especially if you want to break through your revenue ceiling.
Retaining clients at the highest level possible involves:
- Creating a smooth and effective onboarding process
- Clearly communicating how your strategies are performing for clients
- Accounting for market saturation by delivering uniquely valuable services
- Personalizing interactions with clients wherever possible
- Using the latest innovations to enhance your services
Reducing churn should be an ongoing process that involves continual refinement and strategy.
Increase Average Revenue Per Client
Aside from increasing the number of clients contributing to your revenue, you can also consider raising your prices. For example, Seven Figure Agency owner Josh Nelson raised his agency’s prices from $1,500 to $2,250 per month to overcome a revenue plateau without changing his churn rate. Of course, you must approach this process strategically to avoid driving clients away.
You should only raise your service prices to reflect the added value your agency provides clients. Showing clients that they’re paying more for something tangible helps soften the blow of increasing their rates.
Acquire More Clients
Client acquisition goes hand in hand with revenue and profitability. If your churn rate is sustainable and you’ve recently increased your prices, you’ll want to focus on bringing in new clients to overcome a revenue plateau.
Client acquisition is a multi-faceted strategy that involves all of the following:
- Expanding your service offerings
- Leveraging referrals from satisfied clients
- Building a strong sales team
- Creating and optimizing lead magnets
- Refining your sales pitch
- Creating targeted campaigns
- Utilizing cold outreach
This process isn’t something you can master in a day, but by focusing your attention on client acquisition, you’ll see your revenue start to increase in turn.
Track and Measure Key Metrics
Aside from poring over your income statement, you should be tracking other key metrics closely to understand your agency’s performance as a whole.
Keeping a close eye on your churn rate, lifetime customer value, number of new clients acquired monthly, and other metrics lets you quickly identify areas of concern. A revenue plateau won’t catch you off guard — you’ll be able to see it coming or even prevent it by focusing your attention on key variables.
Join the Seven Figure Agency for More Expert Strategies
A revenue plateau doesn’t need to plague your digital marketing agency for long. By understanding and implementing the right strategies, you can increase your conversion rates and maintain a steady growth trajectory.
At the Seven Figure Agency, we’re committed to helping over 500 agency owners achieve seven figures and beyond. Join the Seven Figure Agency to learn more about these and other expert strategies to land more clients, deliver better results, retain, and scale.
Schedule your free coaching session today to get started, then check out the Seven Figure Agency podcast for free resources.
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