I remember the quarter I realised we were busy and broke at the same time.

Revenue was up. The team was flat out. We’d just had our biggest month ever. And when I sat down with the accountant, our net profit margin was 6%. Six per cent. On a month where we billed over £180K.

I spent the next week going through every project from the previous quarter line by line. What I found was uncomfortable. Three of our largest projects had actually lost us money. We just never noticed because the top-line number looked healthy.

That was maybe 2016. And it was the start of me obsessing over profitability in a way that, looking back, probably added a few hundred thousand pounds to the eventual sale price.

Why revenue is a terrible measure of success

I get asked all the time: “Connor, how do I grow my agency?” And my first question back is always the same: “Are you profitable?”

Because I’ve worked with agencies doing £2M that take home less than agencies doing £800K. Sound familiar? Revenue means nothing if your margins are thin, your cash cycle is long, and half your projects are leaking money you never track.

When Gavin Early from KPMG’s Deal Advisory team in Belfast presented his “Road to Exit” framework, he broke down the performance drivers that acquirers actually look at. Strategy, benchmarking, profit improvement, working capital, people, data. All of it ladders up to one thing: sustainable profitability.

Not one good quarter. Not a spike from a big project. Consistent, repeatable, provable profit.

Here are the six levers that actually move the needle.

First lever: know where you make and lose money, per project

This is the one that catches people out. You think you know which projects are profitable. You do not.

When I audited our projects at Kaizen, I discovered we had three types:

The split was roughly 40/40/20. So one in five projects was actively losing us money, and we had no idea because we never looked at profitability at a transactional level.

Gavin Early calls this “taking a transactional view of profitability and its drivers.” In plain English: stop looking at your P&L once a quarter and start tracking margin on every single project.

When we started doing this, our average project margin went from about 28% to 42% in six months. Not by charging more. By stopping the leaks.

What is your agency actually worth right now? Profitability is the single biggest driver of valuation. Use our free Agency Valuation Calculator to see where you stand. Five minutes, no fluff.

Second lever: pricing (the fastest one)

I lost £30,000 on a single project early in my career. Quoted £5,000 for a manufacturing rebrand. Client accepted the same day. No pushback, no negotiation. Found out later they’d budgeted £35,000.

That story still stings. But I learned more from that one mistake than from any business book.

Pricing is the fastest profitability lever because every pound of price increase drops straight to the bottom line. If your overheads are fixed (and most agency overheads are), a 10% price increase on the same work can double your profit.

I’ve seen this play out with coaching clients. One agency went from £26K to £50K monthly revenue by raising prices. Same work, same clients, same team size. They were just getting paid what the work was worth.

Another went from £32K to £42K a month using the same approach.

If you have not raised your prices in the last 12 months, you are almost certainly undercharging.

Third lever: delivery efficiency

This one is boring. I know. But it is where the money hides.

Every agency has a utilisation problem. The question is whether you know what yours is. Utilisation is simply: how much of your team’s available time is spent on billable work?

A good creative agency should be hitting 65-75% utilisation. Below that, you are paying people to sit around. Above that, you are burning them out and the quality drops.

When we tracked this at Kaizen, we found our utilisation was about 55%. That meant nearly half our capacity was going on internal meetings, admin, rework, and projects that should have been scoped differently.

We fixed it three ways:

A 15% improvement in delivery efficiency adds more to your bottom line than most new business wins.

Fourth lever: working capital and cash

Gavin Early’s KPMG framework puts “generating cash” front and centre. And he is right. Profitable agencies go under all the time because they cannot manage cash.

The issue for agencies is usually payment terms. You are paying salaries monthly, software subscriptions monthly, rent monthly. But clients are paying you on 30, 60, sometimes 90-day terms.

When we fixed this at Kaizen, we did three things:

Reducing your average payment cycle from 45 days to 20 days frees up cash that you can reinvest, use to hire, or simply keep as a buffer for the months that are quieter.

Fifth lever: benchmarking against reality

You cannot improve what you do not measure. And you cannot measure properly if you do not know what “good” looks like.

For creative agencies doing £500K to £5M, here are the benchmarks I use with clients:

MetricPoorAverageGoodExcellent
Net profit marginBelow 8%8-12%12-20%Above 20%
Gross marginBelow 40%40-50%50-60%Above 60%
Revenue per headBelow £60K£60-80K£80-120KAbove £120K
Average debtor daysAbove 6040-6025-40Below 25
UtilisationBelow 55%55-65%65-75%Above 75%

When I first saw these numbers laid out, I realised we were “average” in three categories and “poor” in one. That was a useful slap in the face.

Benchmarking is not about beating yourself up. It is about knowing where the gaps are so you can focus your effort on the lever that will have the biggest impact for your agency right now.

Sixth lever: forecasting that is actually reliable

This one catches most agency owners off guard. Forecasting feels like a big-company exercise. But acquirers and investors care about it enormously, and for good reason.

If you can show 12 months of forecasts that were within 10% of actual results, you are telling a buyer: “This business is predictable. The numbers are real. The management team knows what it is doing.”

If your forecasts are consistently wrong, that is a red flag. It tells buyers the leadership team does not have a grip on the pipeline, delivery capacity, or cost base.

We started doing monthly forecasting about two years before the exit. Simple spreadsheet. Revenue by client, by month, with probability weightings on pipeline deals. Took maybe two hours a month to maintain.

When due diligence came, the buyer compared our forecasts to actuals over 18 months. We were within 8% every single month. That built more confidence than any pitch deck could.

What to do this week

Right, here is what I want you to do:

Today:

  1. Pull your last 10 completed projects. Calculate the actual margin on each one (revenue minus all costs including time at your loaded rate, not just freelancer spend)
  2. Sort them. Which ones made money? Which ones did not?

This month: 3. Set up a simple project profitability tracker. Nothing fancy. A spreadsheet with: project name, quoted value, actual hours, actual cost, margin percentage 4. Review your pricing. When did you last raise rates? If the answer is “more than 12 months ago,” schedule a pricing review this week

Next 90 days: 5. Start a monthly forecast. Revenue by client, pipeline by stage, overhead costs 6. Compare your numbers to the benchmark table above. Pick the one area where you are furthest behind and focus there

Every pound you add to profit gets multiplied at exit. If your agency trades at a 5x EBITDA multiple, every £1 of annual profit improvement is worth £5 in sale value.

That is not theory. That is how deals get done.

Further reading

If you are running an agency doing £500K+ and you know profitability is the bottleneck, book a discovery call. We will look at your numbers together and figure out which lever to pull first.