There comes the point in every agency’s lifetime where the feast or famine of finding new clients becomes tiresome, and the hunt to build a recurring revenue stream begins.
But building a recurring revenue stream for your marketing agency is easier said than done. You need to offer the right products, at the right time, to entice clients to agree to monthly or annual retainers.
However, when you’re able to win clients over and provide regular work, you’ll be rewarded with a steady flow of agency income that will also allow you to scale.
In this article, you’ll learn the upsides and downsides of recurring revenue, and how you can build revenue streams for your own agency.
What is recurring revenue?
According to HubSpot’s 2018 Marketing Agency Growth Report, 57% of marketing agencies have less than three months of cash flow available:
Not only does that put tremendous pressure on the agency to perform, but more alarmingly, some agencies may struggle to pay their employees wages if they hit a dry spell.
The solution? Recurring revenue.
For a marketing agency, recurring revenue means you’ll have guaranteed income from month to month. Here’s how it works:
Your clients pay you for services from month-to-month, rather than just a one-time fee, or sporadically. With recurring revenue, you can outline your budget more effectively and won’t be scrambling at the end of the month or quarter to figure out how to pay your staff.
Recurring revenue is the lifeblood for agencies and many attempt to offer it on a range of their marketing services. A recent WordStream study found half of agencies that offer paid search services now charge their clients on a retainer basis:
Paid search gives agencies the perfect opportunity to put their clients on a retainer as the work needed to maintain PPC campaigns is constant. It’s a lot easier to sell a client on a monthly PPC retainer than it is for services like design and branding. Chances are if your agency isn’t offering it as a retainer, you’re leaving money on the table.
The positives of recurring revenue
Apart from the biggest pro (recurring income), there are many other reasons why building recurring revenue streams into your agency can help it grow.
Pro #1: Free time = business growth
As an agency, you know time is money. The more spare time you have, the more projects you can take on, and the more time you can spend prospecting new clients.
Having recurring revenue allows your agency to free up more time. Think about it like this.
If your agency earns $500,000 in revenue every year, but half of it is recurring, that means 50% of your total annual revenue is on autopilot.
Since you know that money is constantly coming in, not only will you be less stressed about cash flow, but your staff can spend less time chasing new clients, and more time developing new products and testing out different marketing strategies.
Pro #2: Cash flow will keep you afloat
A recurring revenue stream can keep your agency afloat, and provide a level of security. It will make everything from budgeting to securing loans easier for your business.
If you plan to expand your agency at any time in the future, potential investors and loan providers will look at you as a safer investment if you have recurring revenue streams. Without them, your income may be too sporadic.
As an agency, you know what monthly costs you’ll have: salaries, loan payments, and accounts payable. But there are also many unexpected costs that come up (office supplies, scope creep, etc.). With recurring revenue streams, dealing with all these associated in running an agency will become immediately less stressful.
The downsides of recurring revenue streams
Recurring revenue streams are not all positive, unfortunately. Some services eat up a lot of time and require constant management. For instance, if you’re providing social media management for a client, you’ll need to:
- Provide daily updates for their social media channels
- Constantly manage and create advertisements on social media platforms
- Manage their presence across channels like Facebook, LinkedIn, and Twitter
You have to monitor them 24/7. If you don’t have a system in place, or you haven’t invested in a social media management platform, this revenue stream may turn into a burden for your agency.
And if you’re offering hosting and maintenance retainers for client websites, it’ll be on you to fix any problems that happen, no matter the time of day. You’ll essentially be on call to your client’s needs when it comes to their site issues.
That’s why poorly managed revenue streams are often not worth the return they provide. Ongoing work is inherently more challenging to plan, manage, and assign.
You have to factor in employee time and the costs for management tools (which are often subscription based). Most require an additional fee for every member of the agency who will be accessing them. If you have ten employees, and you use ten different management tools, the costs for managing recurring revenue clients quickly adds up.
What are the best ways to build recurring revenue?
The single best way to build a recurring revenue stream for your agency is to sell services that aren’t one-off projects. This means providing subscriptions and maintenance packages to your clients instead of offering a one-off product for a hefty lump sum.
Not only will this make the product more affordable for clients by spreading out the cost, but it will also guarantee you have money rolling in every month.
Here are a few services you can offer on a subscription or maintenance basis:
1. Offer content marketing subscriptions
A DemandMetric study found content marketing costs 62% less than traditional marketing and generates about 3x as many leads. Customers also preferred to learn about a brand through content marketing over traditional advertising:
The good news for agencies is, many companies struggle to create quality content in-house. In fact, 35% of B2B businesses say creating quality content is their biggest marketing hurdle.
Position yourself as a marketing agency who can solve this pain point. Offer a content marketing subscription that will provide clients with blog posts, infographics, white papers, and ebooks.
2. Ongoing social media management services
Having a presence on social media is no longer a choice for businesses. Yet a lot of businesses do social the wrong way. They either rush it or completely miss the mark with what they’re trying to tell their audience.
Like content creation, companies don’t tend to prioritize their social media, and their image can suffer because of it — their bottom line too. Because of this, several agencies now offer social media advertising as a service alongside more traditional platforms like Google Ads:
Beyond daily posts, tweets, and status updates, a typical social media management offering could include:
- Branding and design
- Networking on industry pages
- Building and managing social media ads
- Managing the client’s brand on Facebook, LinkedIn, Twitter, Instagram, etc.
- Creating and consulting on campaigns for promotions and contests
As social media requirements vary greatly between businesses, you have the opportunity to offer higher priced packages for companies who want several posts a day or need their replies managed on each platform.
For example, Social Medium offers basic, advanced, and premium monthly subscription packages for their services. The more a customer pays, the more their social media presence is managed by the agency:
Social media management is an excellent way to create recurring revenue through services that you can put on autopilot. Additionally, by using a social media management platform, you can limit the time you spend on a client’s social media accounts.
3. Offer website maintenance and support packages
Websites are the bread and butter for many agencies, but they also come with their own problems.
Most agencies build custom websites for a one-off fee, and then, once the project is complete, they rarely hear from the client again. However, you can turn a one-time client into a monthly revenue stream by offering payment plans and maintenance packages.
The most common package agencies can offer is website maintenance. This means your agency can provide simple services such as site and content updates, plug-in updates, small design tweaks, and regular site backups.
This is precisely what Raleigh agency Jawfish Digital provides their clients:
The agency’s service covers a website build but also includes ongoing maintenance. This includes performing routine theme and plug-in updates, monitoring the site for security threats, and routinely backing up the site in case anything ever happens.
Jawfish Digital offers clients different packages, which ensures a healthy monthly revenue for its bottom line:
4. Ongoing consulting calls
If your clients want your advice and consulting expertise, you should be charging for it.
Offer to consult as an add-on service through ongoing monthly, bi-monthly, or weekly calls with your clients to discuss their website, digital, or social media strategy.
The type of industry your client is in will depend on what type of consulting you offer, but it could include:
- Helping your client optimize websites for conversions (CRO)
- Offer specialty advice on their marketing or social media strategy
- Making recommendations for ad campaigns
- Offering advice to their on-site SEO
5. Upsell services that supplement your current services
The first step to upselling or cross-selling is to determine what additional services you can offer to a client that is related to the one they’re most interested in.
For example, as a web design agency, you could offer web hosting. If you’re a content marketing agency, offer a content audit or link building.
The best way to upsell or cross-sell your agency’s services is to solve a single problem for your client and solve it well. If the client can see that there is a real benefit to working with your company, they will be more receptive to additional services.
Recurring revenue can take the stress out of your agency’s cash flow
Just like any flow of steady cash, building up recurring revenues in your agency can bring you some much-needed stability in the way you operate.
Not only will a steady stream of cash help you pay bills and help with forecasts, but it will also ensure you can pay staff salaries.
Building recurring revenue streams doesn’t have to be a mammoth endeavor. All it takes is repackaging existing services into monthly payment plans, or charging for services that might’ve been caught up in scope creep.
Take a step back, look at every service your agency offers, and think about how you can package and sell it to a customer to start building recurring revenue today.
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