Crafting A Three-Legged Stool of Agency Income

Written By Danielle Fauteaux

Your agency should diversify its sources of income primarily because the market ebbs and flows and you need to not hedge all your bets in one place. Depending on your form of agency services, your target customers, and the way your organization is structured, market changes will affect you in different ways in different seasons. It’s like they say; “As the wind blows, there your income goes.” (That’s not actually a real proverb, but, hey, we can make it a thing.)

Your process of achieving multiple steady streams of income is similar to the process of crafting a stool or chair. Picture your revenue streams as the legs and consider:

  • How many do you have right now?
  • Are they similar in size or widely different?
  • If market changes occur, could any of your revenue streams get knocked out?
  • Are any of your revenue streams completely dependent on third-parties or specific employees?

If your revenue streams feel a bit shaky, you may have some work to do. Fortunately, there are a variety of ways to build up a sturdy three-legged stool of income for your agency, starting with identifying the most likely legs to craft into your stool and then determining how many legs you should have right now versus work towards adding.

Common Forms of Agency Income

There are many ways to actively and passively generate revenue for your agency. Below are some of the most common:

Recurring Services / Retainers

Agency services are at the core of most agency’s revenue streams. Most agencies offer either project based or retainer and recurring services based offers. Project based income is often a less predictable stream of income than retainer based services, but both are only scalable alongside the number of qualified employees and third-party resources you are paying for to deliver the service.

Proprietary Products

Services are bound by your ability to deliver a solution to a customer’s problem at the right time, with the right delivery team, and can only be scaled so much as a result. Proprietary products, on the other hand, are only bound by the limits of market demand. These products are something you invest the resources in to create once that continues selling by little other than marketing investment and updates as necessary. Proprietary products are often viewed as the “Promised Land” of

Mailbox Money

“Mailbox Money” refers to income that arrives on a regular cadence and in a passive way. This is what some call “easy money” but will take initial up front effort to get started and is usually not one of your three original legs of the stool. This can be in the form of ad revenue from online and physical publications, tiered membership fees and subscriptions income. Any recurring income from proprietary products, investment dividends and partnership commission also fit into this category. Investment Dividends are returns based on agency investments in the stock market, real estate, mutual funds and CDs, and various other forms of investments.

Partnership Commissions

Agencies leverage specific tools, softwares, and systems to deliver their services on. It is these products and SaaS offerings that agency services are built upon where you can leverage partnership commissions from certain product and SaaS vendors. Do your research and see if existing tools you leverage offer any kind of partner program. Then skeptically evaluate the option to ensure it is going to yield actual returns, not just false promises.

One Off Engagements

One off engagements that spotlight the owner’s or other team member’s industry and service expertise is another avenue for income. Generating invitations for speaking at events, providing one-on-one consulting without direct implementation services, and group workshops are three types of one-off-engagements that can become lucrative revenue streams if you build your brand the right way – invoking the assurance of thought leadership and industry expertise into the target audience.

Can You Have More Than Three Legs of Income?

Yes! You can more legs of income, however, keep the number of income streams in alignment with what your agency resources can effectively manage. If you stretch yourself and your agency resources too thing trying to manage or build a seven legged stool of agency income, you could end up stretching your resources so that none of your legs of income ever reaches it’s full potential.

Consider which three legs make most sense for your agency to start with. Then, once you have those legs underneath you, you can diversify your income further from a stool to a 4-legged chair. The analogy ends there, but your income streams don’t have to! Just make sure, and double sure, that you have the proper resources to maintain every leg of your agency income effectively with little wiggle.

What to Do If You Only Have One Stream of Income

Fledgling agencies will not have a stool – new firms are likely bouncing around on a one-legged pogo stick or walking on two stilts and that’s okay. Your agency won’t be built overnight.

What you should do is map out options for leg two and leg three that you use to map your trajectory. Then, get a solid foundation underneath you for each leg of income before turning your attention to the next leg. What I mean by this is to be mindful not to expand your efforts on a new leg of income to make up for a leg of income that is falling short. Fix the root problems of that leg of income first, and once it is stable, then consider additional streams of income.

Alternative Ways to Build a Three-Legged Stool

The primary purpose of diversifying your revenue sources is to protect your agency from uncontrollable market forces and industry changes. Thus, if you’re not interesting in diversifying the types of agency offerings you provide, consider diversifying the industry niches that you are a thought leader for. This allows you to become an industry expert in one field first, and then another, and then another.

Bear in mind, this just not mean just telling prospects that you service companies in X, Y, and Z industries. You have to prove that you are a thought leader within those industry verticals and prove that your understanding of how to apply your offering specifically for said niche industry is superior to hiring a general firm that offers the same services.

Work to Get Your Legs of Income Balanced

Your consistent efforts to diversify agency revenue streams will allow you to clarify to yourself and your agency leadership what opportunities to say yes to and what opportunities to forgo. This focus can be the saving grace that prevents overstretching your agency resources and failing at most of the things you are trying to do. Instead of trying to build out additional legs to the chair, focus on lengthening the legs you already have so that your diverse streams of income are more balanced, allowing you a sturdy surface to sit on that won’t sway in the winds.

Once you have a sturdy chair, your agency can take part in “agency hobbies” that may never yield high revenue quantitatively but provides value to the people under your roof and to those you all serve and interact with.

Building a successful marketing agency takes grit, a focus on your value, and sometimes a *loving* kick in the pants.

Needing an ally as you achieve your long-term goals?

I’d be happy to help.

Danielle Fauteaux, Momentum Marketing Agency Consultant

Danielle Fauteaux

Hi! I’m Danielle. I’m passionate about helping creatives recognize their value and place in this world, passionate about helping leaders regain control over their responsibilities, passionate about encouraging others to live more meaningful lives; and passionate about doing more with less. I guide creative firms through the Momentum Framework to achieve their revenue and profit goals while falling back in love with the mission they originally set out with. Let's chat ☕ gettingmomentum.com/#contact 👈