How exactly do marketing agencies make money?

Like many businesses providing services, marketing agencies make money by selling the time of their people.

Take a fully-loaded salary cost and mark it up by an amount sufficient to cover overheads and make an economic profit. The more of an individual’s time that can be billed to clients, the more money the agency makes and the more profitable it becomes. Fairly straightforward stuff, I hear you say.

But is selling time the only opportunity for an agency to generate a revenue stream? Well, look at the other activities an agency gets involved in and identify where the flow of money goes.

Most agencies are involved in some form of production whether a film, event, poster or other form of marketing collateral. Their clients rely on them to put into reality the ideas their people come up with. And so is born the need for the marketing production supply chain. A plethora of suppliers make their services available to the agency to deliver the final product. The money that makes it all happen comes from the brand. The agency controls the supply chain (and acts as principal in the contract with the suppliers), but the money that makes it all work comes from the brand.

Is there an opportunity for the agency to generate a revenue stream from this scenario? Definitely. What proportion of agencies are tempted to cultivate it? How many actually do so? Very happy to have a conversation…

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