35%+ Profit Foundations

The key #’s for high profit

Author

Nick Avaria
August 24, 2025

Owning, buying, selling, and working with agencies for over a decade has enabled me to see a lot of business models.

But all agencies that are high profit have three things in common. If you want to generate higher profits in your agency, save this newsletter and compare to your own agency.

I’m Nick Avaria, agency owner, and founder of Agency Acquisitions. Every week I share a client story, insights, and tips into scaling your agency faster. For exclusive video content, make sure you hit Subscribe on my YouTube channel.

The 3 commonalities that all high profit agencies have:

  1. High lifetime value of client, $100k+. Achieved by lowering churn

    1. Doesnt matter if its $3k per month for 3 years or $8k per month for 1 year

  2. They have a way to get consistent leads

    1. This can mean closing as low as 6 or as high as 500+ deals per year (I’ve worked with agencies closing 40+ deals a month).

  3. The all deliver their product/service at or below 30% cost vs AGI (agency gross income)

    1. This is the most important one

    2. This comes down to pricing models - value based is a must here. The more unique it is the lower the cost vs AGI it will be.

In my experience the agencies that drive down the delivery cost below 30% are the ones that can generate even higher profits.

This is because the ones that have a consistent lead flow have to spend 8-12% of marketing (generally).

So getting savings from non-payroll costs is a tough thing to do while investing in lead gen as it constantly changes.

Here are the key numbers:

  • AGI is the denominator for the numbers below. 

    • The formula is: Top line revenue minus passthrough costs.

  • Staff costs (this includes contractors delivering work): 45% for both billable and non-billable

    • 30% maximum cost for all billable staff

    • 15% for non billable staff

  • SG&A (sales general and administrative): this is all other non-staff costs. Things like rent, media spend, software, etc. = 20-25%

    • If you are in an expansion phase with more sales and marketing costs you’re going to be on the higher end.

Next steps to audit your own agency:

  1. Get your income statement in the AGI format.

  2. Divide staffing costs by revenue type and billable vs non-billable

  3. Compare the numbers vs the benchmarks above

This is the starting point to the journey to higher profit. 

If you need any help growing your agency profitability shoot me a message by just hitting reply to this email.

Nick