new1M

Digital Agencies are amazing businesses. They are creative, fun and you often get to work with great brands.

But… whilst fun, project based work is such a damn hard way to make money, and even harder to grow an Agency sustainably.

As an advisor to 30+ Digital Agencies and Startups, we’ve been working together on a super simple model that can help Digital Agencies get to £1M in recurring revenues.

20 * 5 * 1K

What does that mean?

20 clients paying for 5 services @ £1000 per service per month

That gives you a £1.2M potential turnover which gives you space to lose a couple of clients along the way and you still come in at £1M per year (every year).

But what recurring services can I offer my clients?

If you’re short on ideas of recurring services you can sell, don’t worry- see my post here on generating recurring income (there are 14 of them)

A quick example:

A Digital Agency could offer the following 5 monthly recurring services to 20 clients in the Entertainment niche @ £1000 per service.

  1. Design discounted retainer

  2. Development discounted retainer

  3. Support contract

  4. Conversion services

  5. SEO services

So how can you do it?

Here’s some tips to get you started;

Start with a list of 200 prospects in a given sector. (Ideally one where you already have a case study – it will be much easier to sell to more of them).

Make sure all the prospects have a turnover of £2M+

Why? You will be asking them to part with £60K+ per annum so they need to have a decent turnover to allow a marketing budget of that size. (£60K is 3% of a £2M turnover so therefore affordable)

Side note – This is why it is difficult to get recurring revenues from startups or small businesses! (unless they are well funded)

Companies with £2M revenues are not huge businesses and therefore very approachable (typically 20 – 40 employees) and there are 1000s just in the UK. (Many more in the US!)

All you need to do is make 10% of the 200 prospects on the list your customers – Simples.

For clarity, I’m not saying that you start at £5K per month for each client.

I would suggest finding 5 clients @ £1K per month, providing an amazing service, building a great relationship with them and then expanding the relationship to provide additional recurring services to them.

Remember the 20 * 5 model is just a guideline.

For example, 40 clients @ £2.5K per month also works but remember you will need more staff to deal with the additional project management overhead of managing more clients. (In plain english – you will take less cash home at the end of the year).

So far so good?

Great.

Here are some things you need to consider next;

  • How you find clients that need recurring services

  • How you price recurring services

  • What you say to prospects to sell recurring services

Has this post been useful?

If this post has been useful and you’d like to hear more – I’m going to be covering these subjects and ‘How to make £1M in Recurring Revenues’ in future posts.

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