Most Profitable Business Models for Agencies: According to 20 Agencies | Databox Blog (2023)

If you are like most agency founders, you probably started as a freelancer or a consultant.

You found yourself in demand with more work than you could handle alone. So, you started an agency.

But, you quickly realized that scaling and running an agency is VERY different from being a freelancer.

The biggest barrier to growth for most agencies is their business model. It needs to be financially viable to not only keep the lights on but ensure you have the necessary team and resources in place to deliver quality work.

In this post, we’re sharing a framework to help you find a profitable agency business model.

  • How Do You Decide Which Business Model to Adopt?
  • Which Business Models Are Most Profitable for Agencies?

How Do You Decide Which Business Model to Adopt?

There is no shortage of ways that agencies can charge for their services.

However, if you want to stay in business, you need to pick a business model that hits these key criteria:

  • There is a defined market for the services you are offering and clients understand it and are willing to pay.
  • You have a compelling offer(s) (i.e. value props)
  • It is financially viable for the agency to deliver the services.

Note: Once you are clear on your agency’s business model, this makes it easier to identify and turn away clients that aren’t profitable or a good fit.

So, we reached out to 20 agency owners to learn more about their business models. Of the agencies we surveyed, 55% of them have more than 25 clients.

Most Profitable Business Models for Agencies: According to 20 Agencies | Databox Blog (2)
(Video) Morning Dough (04/11/2021) - Most Profitable Business Models for Agencies: According to 20 Agencies

The majority of the agencies we spoke to prefer a simple flat-fee retainer or project-based model.

Most Profitable Business Models for Agencies: According to 20 Agencies | Databox Blog (3)

Related: Agency Reporting: 9 Tips to Effectively Prove Your Value to Clients

Which Business Models Are Most Profitable for Agencies?

From flat-fee retainers to projects, performance-based pricing, and a hybrid model, we’re taking a closer look at the most common agency business models.

  • Flat-fee retainers
  • Project work
  • Hybrid retainer and project model
  • Flat-fee + commission

Flat-fee retainers

The majority of the agencies we surveyed prefer the retainer model.

“As an agency, our recurring revenue model is based on a fixed monthly retainer fee for clients,” says Jonathan Zacharias of GR0. “Depending upon the client and their package, this retainer fee can fluctuate drastically. Specifically, as an agency that strives to turn organic search into a performance marketing channel, we focus on three main buckets: content writing, performance HR, and on-page optimization. Depending on the suite of services, we then adjust our retainer fee accordingly.”

Tanya Gauthier of ByMillennials Agency Inc adds, “We’ve tried it all – performance-based, hourly, retainer, per-project. Short answer is long-term retainers. They allow agency owners to plan ahead their talent and resources without needing to stress about filling their team’s schedules or searching for clients last minute.

At ByMillennials, we’ve worked on curating a monthly retainer model that is a win-win for both us (the agency) and the client – a month-by-month agreement with no “commitment”. Why? Gaining your client’s trust is absolutely crucial. We end every sales pitch by telling the client that there is no commitment. If the fit isn’t right, we can end it right away, which has given us an average client LTV of 8+ months. When the client feels in control rather than “stuck,” the relationship is a lot healthier.”

Related: Client Reporting 101: Tips and Best Practices for Agencies and Freelancers

Long-term collaboration is one of the biggest advantages of the retainer model.

Most Profitable Business Models for Agencies: According to 20 Agencies | Databox Blog (4)

In fact, 50% of the agencies we surveyed have up to 20 clients that have been working with them for over a year.

Most Profitable Business Models for Agencies: According to 20 Agencies | Databox Blog (5)

An added advantage of the retainer model is reducing some of the uncertainty and volatility that comes with having an agency. When you have clients paying a flat fee each month, you can better predict revenue and cash flow, which can help with allocating enough resources and managing team costs and related expenses.

“Obviously long-term retainers,” says Alex Birkett. “It’s not just the profitability, it’s the predictability and the ability to allocate resources properly. Project-based can work if the projects are large enough. Token / credit-based systems are silly unless you’re super small and agile (and want to deal with client success headaches). And in certain businesses (SEO, content, CRO), the longevity of a working relationship is a predictor of success, so this benefits the client too. Granted, it’s hard to walk into a long-term retainer contract. But if both sides have trust and the relationship works, that’s the best agency business model.”

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Jonathan Saeidian of Brenton Way agrees, “We focus on long term MRR so we allocate more resources to each client and reduce profit margin to maintain relationships. This has reduced our churn rate to only 5% and provided 2 referrals for each client on average.”

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Simeon Prokopov of Agile Digital Agency adds, “The reason why monthly retainers prove to be the most profitable is that we pack them as a product.

This means:

  • Our work is easy to plan
  • We know exactly what we have to do every month, so scheduling it is easy.
  • We are more efficient
  • Each retainer has a strict workflow so there is no guesswork involved with projects.

In the end, this means more efficient project management and results delivery.

Retainers are scalable.

  • We can quickly expand our capacity since we have a clear process in place.
  • Easier to market and sell
  • Instead of paying large amounts upfront, clients subscribe to a monthly fee.

They are also easy to explain. Since they are ‘productized’, they have specific features that we define and can list in the sales process. Our clients get a very clear picture of what we are doing on a monthly basis.

  • Predictable invoice pipeline
  • As retainers are recurring every month, and contracts are typically signed on an annual basis, we can plan our sales in the long run.
  • Long-term client relationship
  • The nature of retainers is based on a long-term relationship with your client.

This opens the door for upselling other services or higher retainers. Having said all this, it does not mean that everything about this model is perfect. The above is an ideal situation. Often clients require custom tweaks to our pre-made retainers and onboarding a new client or adding a legacy project takes time. However, I believe the advantages outweigh the downsides, and this is definitely our most profitable model.”

Related: 9 Ways Agency Reporting Can Help Create Transparency with Clients and Boost Client Retention

Project work

Project work tends to be the most profitable out of all of the business models. However, none of the agencies we surveyed use this model exclusively. That’s because it is also the hardest to scale and the most volatile.

“While finite, deliverable project work will likely always remain the highest margin component of our business, we tend to sacrifice profitability in our client campaigns for predictability by encouraging more long-term, recurring engagements,” says Nate Nead of “Yes, project work can often be long term as well, but when projects are complete, there is a cliff in predictable revenue, which we love to avoid.”

Hybrid retainer and project model

One way to get some of the best advantages of both the retainer and project models is to use a hybrid model.

“We work with clients on both a project and retainer basis and managing expectations is key especially around scope creep,” says Paige Arnof-Fenn of Mavens & Moguls. “Clear communication is the key to success.

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Post the Great Recession, the majority of our work is now project-based (it used to skew to more retainer work before) so the scope creep potential is a lot less now to be honest which makes managing expectations a lot easier. Projects have a beginning, middle, and end so it all ties to the deliverable, very clearly defined. With Covid, many of our projects have slowed down (one with a monthly retainer asked that the fee be spread over 2 months instead, while another is waiting to start phase 2 of the project, for example). Two new projects supposed to kick off last year are now just starting.

When a client comes back after a project has been completed and asks for some additional work to be done on the project I am not shy about explaining that we would need to dedicate more hours on this new project this month in addition to what we had been paid for so it will be incremental time maybe even 25-30% more hours so I offer that we can add on a separate project fee if they would like us to help here too. I also offer to write a new scope of work if that is helpful to drive home the point that another fee is required. I also mention I will send another invoice that must be paid to start the new work. In my experience, they respect you for being in the professional service business especially if you have done great work for them in the past. They come back because they value your quality.”

An added advantage of the hybrid model is that you can grow faster.

For example, Anthony Gaenzle of Gaenzle Marketing says, “We’ve been able to grow quickly by utilizing a hybrid model where our key team members are in-house, and we leverage highly vetted, very talented contractors to scale up when larger projects come through the door. This helps keep overhead down while allowing us to provide top-notch service to our clients. It also allows us to attract and retain the best quality talent in-house because we aren’t overloaded with hiring for unnecessary or redundant roles.

This model also allows us to serve our clients on a project-by-project basis. Whether it’s a huge website redesign with a lot of content creation involved or a small, one-off piece of marketing collateral, we can easily scale up or down to be able to charge clients only for the services they need.

We also offer retainer fees on a fractional marketing basis where the client pays each month for a preset number of hours and then has access to pre-determined marketing services with the flexibility to switch in and out as needed to service all their marketing needs and essentially serve as the client’s marketing department.

Being flexible and offering both models allows Gaenzle Marketing to be there for clients, no matter what level of service they require. I’ve utilized this model with two other agencies, each of which saw a good deal of success with the direction.

I highly recommend the hybrid in-house/contractor model, as long as you really dig in and assess your contractors and make sure they’re a fit. That way, they sort of become a part of your team and you can build a level of trust with your team as well as your clients.”

Related: How Much Should Your Marketing Agency Charge for its Monthly Retainer Fee?

Flat-fee + commission

A least common model, but one that can work well for PPC agencies, is a hybrid flat fee model with a commission structure based on results generated. This allows your agency to partake in the upside of delivering exceptional results.

For example, Neil Jose of Aviv Digital says, “Here’s an outline of our business model at Aviv Digital.

  • We focus on selling creative strategies to our clients.
  • We charge our clients for running their ad campaigns and for their maintenance.
  • Apart from that we offer consulting services to our clients and we also train the individual that we’re dealing with on how they can run their marketing campaigns more efficiently.
  • And finally comes our monthly recurring revenue.

The reason why we opted for this business model is that here we don’t solely rely on our monthly recurring revenue. This business model provides us with other sources of revenue as well. Implementation of this business model has given us some great results. We’ve acquired a couple of long-term clients who are really satisfied with our services.”

With agencies, there is no one-size-fits-all business model. It all boils down to the types of clients you work with, the services you offer, and the results you can generate. Many agencies experiment with different business models based on the lifecycle and needs of the business. The only wrong business model is the one that isn’t financially viable for your agency.

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Which business model is most profitable for marketing agencies? ›

Project work. Project work tends to be the most profitable out of all of the business models.

Which type of agency is most profitable? ›

In addition to being the most popular service offering, social media marketing is also considered to be the most profitable service offering by 32% of agencies. This is followed by full-service digital (reported as most profitable by 28% of agencies) and website design and development (24%).

What are the 9 most successful business models of today? ›

Let's take a look.
  • The social, authentic business. ...
  • The employee-centric business. ...
  • The partner-centric business. ...
  • The customer value-obsessed business. ...
  • The constant-innovation business. ...
  • The data-driven business. ...
  • The tech-savvy business. ...
  • Where to go from here. I hope you've enjoyed my list of successful business models.

What is the business model of an agency? ›

Typically, an agency's business model is one that is based on a client paying an agency a fee for its services. The fee is based on the number of full-time employees working on that business as well as the scope of the business that the agency handles.

What is an example of a profitable business model? ›

An example is a soap manufacturer that sells its finished products directly to customers or wholesalers who resell the product to consumers.

What are at least 3 revenue models which a business can use to be profitable with an online presence? ›

Common revenue models include subscription, licensing and markup. The revenue model helps businesses determine their revenue generation strategies such as: which revenue source to prioritize, understanding target customers, and how to price their products.

What are the 5 most profitable companies? ›

This can lower or even outweigh potential returns.
  • #1 Apple Inc. (AAPL)
  • #2 Microsoft Corp. (MSFT)
  • #3 Alphabet Inc. (GOOGL)
  • #4 Industrial And Commercial Bank Of China Ltd. (IDCBY)
  • #5 ExxonMobil Corp (XOM)
  • #6 China Construction Bank Corp. (CICHY)
  • #7 Shell PLC (SHEL)
  • #8 Agricultural Bank of China Ltd. (ACGBY)

How can I make my agency profitable? ›

Here's a quick review of the five strategies to maximize your agency's profitability:
  1. Keep prioritizing superior customer service.
  2. Stop sweating the small stuff.
  3. Build out a paid search offering.
  4. Empower staff productivity.
  5. Find the right system to manage profitable client work.
Feb 5, 2020

How can I make my agency more profitable? ›

How to Improve Your Agency's Profits
  1. 1) Improve Utilization Rate. ...
  2. 2) Reduce Overservicing. ...
  3. 3) Implement Long-Term Capacity Planning. ...
  4. 4) Create a Predictable Pipeline of Leads. ...
  5. 5) Create More Stable Revenue Streams. ...
  6. 6) Make Growing Existing Accounts a Priority. ...
  7. 7) Improve Your Pricing.
Apr 12, 2016

What are the 7 business models? ›

Types of business models and examples
  • Retailer model. A retailer is the last link in the supply chain. ...
  • Fee-for-service model. ...
  • Subscription model. ...
  • Bundling model. ...
  • Product-as-a-service model. ...
  • Leasing model. ...
  • Franchise model. ...
  • Advertising or affiliate marketing model.
Jul 14, 2022

What are the 5 main business models? ›

A successful business model is one that creates, and over time, builds upon a competitive advantage. In their book Business Model Generation, authors Osterwalder and Pigneur discuss five different types of business models: 1) unbundled, 2) long tail, 3) multi-sided platform, 4) free, and 5) open.

What is the most famous agency model? ›

Ford Models — According to, Ford Models is the most influential agency in the world. Ford has offices all over North America (and the world) and their clients are represented by all the major fashion houses and major publications. It is also one of the top male modeling agencies in the World.

What model agency does Kendall Jenner use? ›

So who is Kendall Jenner's Modeling agency? Kendall is signed with The Society Management, a model management company under Elite Models Worldwide.

What are four key business models? ›

A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management).

Which online business model is the most profitable? ›

E-commerce: Online retail sales continue to grow year-over-year, making e-commerce a lucrative option for entrepreneurs. From selling physical goods to offering digital products, e-commerce offers a range of opportunities for businesses to reach customers and generate revenue.

Which models do successful businesses have? ›

Types of successful business models
  • Subscription-based model. A subscription-based model is one where companies offer ongoing services or products to encourage customer loyalty and recurring payments. ...
  • Freemium model. ...
  • On-demand model. ...
  • Product or service model. ...
  • Reseller model. ...
  • Broker model. ...
  • Ad-based model. ...
  • Agency-based model.
Mar 15, 2021

What are the 4 types of profit making business? ›

When looking at business accounts there are 4 key types of profit:
  • Gross Profit.
  • Net Profit.
  • Profit Before Tax.
  • Profit After Tax.
Jul 10, 2017

What are the top 10 most profitable business? ›

Most Profitable Business Ideas
  • Business Consulting. If you're an expert in your industry and have been working at it for years, you should consider consulting. ...
  • IT Support, Technology Consulting, and Repair. ...
  • Cleaning Services. ...
  • Accounting and Tax Preparation. ...
  • Auto Repair. ...
  • Real Estate. ...
  • Online courses. ...
  • Marketing and PR Services.

What are the top 10 most profitable small businesses? ›

The 11 Most Profitable Small Businesses
  • Accounting Firm. Accounting firms track income, expenses, taxes, and other financial-related information for businesses and individuals. ...
  • Healthcare. ...
  • Real Estate. ...
  • Legal Services. ...
  • Dental Care. ...
  • Warehouse and Storage. ...
  • Cleaning Services. ...
  • Funeral Homes.
Feb 8, 2023

Which companies are making huge profits? ›

  • Reliance. Reliance Industries Limited (RIL) tops the spot of the most profitable company in India for the year 2021-22 after earning Rs. ...
  • ONGC. Oil and Natural Gas Corporation (ONGC) is a multinational oil and gas company. ...
  • Tata Steel. ...
  • Tata Consultancy Services (TCS) ...
  • HDFC Bank. ...
  • SBI. ...
  • ICICI Bank. ...
  • IOC.
Jul 4, 2022

What is a good profit margin for an agency? ›

Average agency margins are in the 11-20% range. Single-digit margins are a sign of trouble. Use a profit margin calculator to figure out your margins. If your margins are too low, adopt value-based pricing, switch to recurring billing and create a capacity plan.

What are the five 5 ways to create an agency? ›

With the reference of contract Act 1950, there are 5 ways that may arise an agency, which are, by express appointment by the principal, by implied appointment by the principal, by ratification by the principal, by necessity and by the doctrine of estoppels/holding out.

How much do agencies make with models? ›

Model Agency Salary
Annual SalaryMonthly Pay
Top Earners$100,000$8,333
75th Percentile$68,500$5,708
25th Percentile$36,000$3,000

How do agencies get big clients? ›

Best Practices To Get Clients For Marketing Agency

Join different Facebook groups that set well with your niche & reach out to influencers in your industry. Ask for referrals & re-approach lost clients. Invest time in SEO and social media management to increase your visibility.

What is the average profit for an agency? ›

What's Your Advertising Agency's True Profitability? The average marketing agency earns a net profit margin between 6 and 10 percent — with digital agencies reporting even higher margins around 20 percent. Corporate advertising agencies, in some cases, report margins as high as 40 percent.

Who is the No 1 model in the world? ›

The Top Model of the World is an international search for the ultimate model. The event started in 1993 in Miami, organised by the Globana Group. It is now owned and managed by the World Beauty Organization. The current Top Model of the World for 2023 is Mariana Macias from Mexico.

Who are the Big 5 top models? ›

Cindy Crawford, Christy Turlington, Linda Evangelista, Naomi Campbell and Tatjana Patitz are sometimes called the “original supermodels” or “the big five”, as they were the biggest names by the end of the 1980s when supermodels were rivalling film stars for wealth, glamour and tabloid space.

Who is the hottest model of all time? ›

Everything you need to know about some of the most beautiful women on the planet.
  • 3 of 10. #8 Daniela Pestova. ...
  • 4 of 10. #7 Alessandra Ambrosio. ...
  • 5 of 10. #6 Stephanie Seymour. ...
  • 6 of 10. #5 Adriana Lima. ...
  • 7 of 10. #4 Tyra Banks. ...
  • 8 of 10. #3 Gisele Bundchen. ...
  • 9 of 10. #2 Marisa Miller. ...
  • 10 of 10. #1 Heidi Klum.

What are the 9 business model? ›

A business model describes the rationale of how an organization creates, delivers and captures value. It can be described through 9 building blocks: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships & Cost Structure.

What are the 9 business model categories? ›

The Business Model Canvas consists of nine essential parts: Customer Segments, Value Proposition, Revenue Streams, Channels, Customer Relationships, Key Activities, Key Resources, Key Partners, and Cost Structure.

What is the most widely used business model used today? ›

Retailer. This is probably the most common business model around. Essentially, you have products – either your own or from manufacturers – and you sell them to consumers. This can be done in a physical store or as an e-commerce company.

What are the top business models for future? ›

In 2025, the top areas of emerging business model change will be in networking, media and entertainment, advertising, 3D printing, blockchain, tax, medicine, and buildings.

What are the five business models that have proven successful for e-commerce? ›

In eCommerce, there are five different B2C business models: direct sellers, online intermediaries, advertising-based, community-based, and fee-based. Direct selling is the most common model.

What are the three big business models? ›

Licensing business model: Technology or innovations are monetized by licensing them to other companies. Open-source business model: Your product is free but you generate revenue through other means such as crowdsourcing. Subscription business model: Customers pay a recurring fee to access your product or service.

What are 3 different business models? ›

Business models come in a variety of forms. Direct sales, franchise, freemium, and subscription models are among the common kinds.

Who are the top three highest paid models? ›

Who ranks as the highest paid model in the world?
  1. Kendall Jenner - $40 million. ...
  2. Gisele Bundchen - $40 million. ...
  3. Chrissy Teigen - $39 million. ...
  4. Rosie Huntington Whitely - $32 million. ...
  5. Adriana Lima - $31 million. ...
  6. Cara Delevingne - $31 million. ...
  7. Gigi Hadid - $20 million. ...
  8. Bella Hadid - $19 million.

Who is the top model in America? ›

To give an idea of how much the top models actually earn, here are the five who earned the most over the past 12 months.
  • Gigi Hadid, $9 million. ...
  • Rosie Huntington-Whiteley, $9 million. ...
  • Cara Delevingne, $19 million. ...
  • Adriana Lima, $30 million. ...
  • Kendall Jenner, $40 million.
May 12, 2022

What agency is Gigi Hadid with? ›

International supermodel, Gigi Hadid began her career as a toddler when she appeared in a campaign for Baby Guess at just two years old. In 2011 Hadid signed with IMG models, and two years later moved to New York City to pursue a career in the trade.

What modeling agency does Hailey Bieber use? ›

Hailey Bieber | Miu Miu S/S 2022 - IMG Models.

What modeling agency does Gucci use? ›

In addition to Gucci, Zebedee counts Fenty Beauty, Tommy Hilfiger and Estée Lauder among its clients.

What is the most profitable form of marketing? ›

6 Highly Profitable Marketing Strategies for Small Businesses
  • 6 Highly Profitable Marketing Strategies for Small Businesses.
  • Search Engine Optimization (SEO) ...
  • Content Marketing. ...
  • PPC Advertising. ...
  • 4. Facebook Advertising. ...
  • Social Media Marketing. ...
  • Email Marketing.
Jun 16, 2022

Is marketing agency a profitable business? ›

Certainly, Yes. A business from any category that approaches digital marketing to reach its audience online and wants to turn into profitable can get benefits with time.

How profitable are marketing agencies? ›

Regardless of what option you choose, the good news is that digital marketing agencies have the potential to be extremely profitable. NYU Stern's database for more than 7,000 companies found that the average profit margin is 7.9%.

Which marketing is most in demand? ›

7 In-Demand Digital Marketing Skills in 2023
  • Content. ...
  • Search Engine Optimization (SEO) and Search Engine Marketing (SEM) ...
  • Video Marketing. ...
  • Social Media Marketing. ...
  • Data and Analytics. ...
  • Conversion Rate Optimization (CRO) ...
  • Marketing Automation. ...
  • Become a Digital Marketer.
Nov 17, 2022

What businesses have the highest profit margins? ›

The 10 Industries with the Highest Profit Margin in the US
  • Land Leasing in the US. ...
  • Commercial Leasing in the US. ...
  • Regional Banks in the US. ...
  • Private Equity, Hedge Funds & Investment Vehicles in the US. ...
  • Storage & Warehouse Leasing in the US. ...
  • Gas Pipeline Transportation in the US. ...
  • Cigarette & Tobacco Manufacturing in the US.

What are the fastest-growing marketing trends? ›

Video-based Content. According to Internet traffic data, video-based content is the fastest-growing digital marketing category, with an anticipated compound annual growth rate (CAGR) of 6.5% by 2025.

What is the most popular business model? ›

Retailer. This is probably the most common business model around. Essentially, you have products – either your own or from manufacturers – and you sell them to consumers. This can be done in a physical store or as an e-commerce company.

How do agencies make money? ›

Staffing agencies typically charge 25% to 100% of the hired employee's wages. So, for example, if you and the staffing agency have agreed on a markup of 50% and the new employee earns an hourly wage of $10, you will pay the agency $15 per hour for their work.

How much does a CEO of a marketing agency make? ›

How much does a Top Agency Executive make in the United States? The average Top Agency Executive salary in the United States is $246,487 as of February 27, 2023, but the range typically falls between $204,955 and $347,545.


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