Veteran agency founder, mentor, and entrepreneur Jonathan Leafe shared his battle-tested insights from decades in the industry. Drawing from his experience pioneering creative tech in the 90s and building a successful 3-million-pound agency, Jonathan outlined the seven key steps to building your dream agency.
Step 1: Positioning and Pricing
The foundation of any successful agency begins with two critical elements: positioning and pricing. Agencies can position themselves across five categories:
- Generic: Like McDonald’s – consistent but unremarkable
- Competent: Like Pizza Express – reliable and good at what they do
- Expert: Like a Gaucho steakhouse – specialised knowledge in a specific area
- Specialist: Like a Michelin-starred restaurant – exceptional in a defined niche
- Unicorn: Like a three-Michelin-star restaurant – truly world-class
While clients often try to recruit agencies at the “competent” level, your goal should be to position yourself as far to the right as possible on this spectrum. The more specialised you become, the higher your pricing power. This positioning naturally guides your pricing strategy, allowing you to command premium rates for specialised expertise.
Step 2: Building the Pyramid
Transform your agency by focusing on creating predictable revenue through three revenue types:
- Projects: One-off work with defined start and end points
- Regular retainers: Consistent monthly income
- Long-term value: Recurring revenue requiring minimal effort (hosting, maintenance, etc.)
Highly successful agencies aim to predict 90% of their annual revenue on January 1st. This shift moves a business from an “enabler” model (project-heavy) to a stable “pyramid” model with high predictability and profitability.
Each revenue type carries different profit margins: projects often run at -5% to -10%, regular retainers at 25-30%, and long-term value services at 50-70% or higher. When engineered properly, this balanced approach can deliver consistent overall net profits of 20-25%.
Step 3: Focus on the Three Core Elements
Every successful agency must constantly work on three interdependent elements:
- Clients: Securing and nurturing the right clients who value your expertise
- Team: Building a group capable of delivering excellent work
- Leadership: Aligning clients and team in the same direction
Clients want great service, great work, and reasonable prices. Team members want interesting work, career development, fair salaries, and empathetic leadership. Agency owners want profitability, growth, and no surprises. When these elements work in harmony, the business thrives.
Step 4: Choose the Best Clients
Evaluate potential clients using a systematic scorecard approach with four key metrics:
- Familiarity (How well do you know them?)
- Value (Fun, Famous, Financial)
- Longevity (Project, Regular, Retainer)
- Relationship (Partner vs. Supplier)
Clients scoring 16-20 points are worth pursuing aggressively, those with 11-15 points should be considered carefully, and those below 10 points are typically best avoided.
Creating “win-win” relationships is essential, where both agency and client experience alignment, profitability, mutual respect, partnership, and growth. When relationships fall outside this win-win zone, they typically don’t last long.
Step 5: Build the Right Team
Evaluate team members on two critical dimensions:
- Culture fit: How well they align with your agency values
- Technical competence: Their skill level and capability
The ideal team members score highly on both dimensions. Be wary of keeping technically skilled but culturally toxic employees, as they can damage your agency from within. Similarly, protect team members who excel in both areas from burnout by ensuring they don’t become overloaded.
For agency effectiveness, consider separating account management from project management roles. Account managers should focus on client happiness and development, while project managers should concentrate on delivering on the agency’s promises.
Step 6: Create a Profit Culture
“Profit is fuel” for your agency. Without it, you can’t grow or reward your team properly. Implement a simple financial structure:
- Total revenue
- Less cost of sales = Gross profit (target: 100%)
- Less general admin (target: 10%)
- Less team costs (target: 40%)
- Less director’s take (target: 10%)
- Equals net profit (target: 20-25%)
Building this profit-focused culture creates the foundation for both business stability and personal wealth accumulation. As an agency owner, structure your personal finances with balanced investment across your pension, business bank reserves, property, and savings.
Step 7: Plan Your Exit Strategy
Consider four main exit options:
- Trade sale: Another agency acquires you (highest potential value but only happens for 1 in 400 agencies).
- Management buyout: Your team approaches you to purchase the business.
- Employee ownership trust: The entire staff acquires the business.
- Management buy-in: You plan and orchestrate the exit on your terms.
The most successful exits are planned years in advance, not executed in haste when burnout occurs. Decide early what legacy you want to leave and build your business accordingly.
Building a successful agency requires focus, discipline, and strategic thinking. By mastering these seven steps, you can develop an agency that delivers consistent client value, provides fulfilling work for your team, and builds lasting wealth for yourself.
Even in our rapidly evolving industry, these fundamentals remain unchanged. With proper planning and execution, you can create an agency that thrives on your terms and provides the lifestyle and financial security you desire.
What is the Better Agency Programme?
The Growth Programme provides crucial peer support alongside expert talks, events, and networking designed for agency leaders who want to take their agency to the next level, whatever that means for you.
Key features include:
- 45-minute expert sessions with a 15-minute Q&A.
- Optional 60-minute group discussions after each module.
- Unified learning through video calls, with accountability groups based on agency size.
Want to hear more from Jonathan?
Become an Agency Collective Grow+ member to access all the Better Agency Programme sessions. To explore membership, book a call with Rob or join a Find Out More session.
