9 Strategies To Build Recurring Revenue In Your Digital Agency

Episode 253

Financials for Agencies

With Jon Morris

Jon Morris is the founder and CEO of Ramsay Innovations, a Finance Management and Strategic Planning company that is focused on helping marketing communication firms grow faster. Previous to starting Ramsay Innovations, Morris was the founder and CEO of Rise Interactive. Under Morris’ leadership, Rise received recognition for excellence in client service, innovative marketing campaigns, and commitment to culture, including acknowledgment from Inc. 500|5000 Fastest Growing Companies (nine-time winner), Ad Age (Best Places to Work in Advertising), Fortune Magazine, Forrester, and more. Morris has been personally recognized as a leader in technology and innovation on the Techweek100 list and Crain’s Chicago Tech 50 list.

As a leader in the digital marketing community, Morris has mentored several entrepreneurs, with a significant focus on the University of Chicago’s New Venture Challenge, a renowned business plan competition where Rise itself got its start. Morris has shared his expertise as a guest speaker, presenting on main stages and at workshops and webinars for organizations such as Search Marketing Expo, Search Engine Strategies, American Marketing Association, The University of Chicago Booth School of Business, Northwestern University’s Kellogg School of Management, Forrester Research, Online Marketing Summit, iStrategy, and Vistage.

Episode highlights:

  • Why knowing your numbers is essential.
  • What percentage of revenue you should invest in sales and marketing.
  • The importance of having a growth mindset.
  • The top numbers that agencies should be focusing on.
  • The importance of locking in your budget and forecasts.
  • Gross revenue, net revenue, and cost of service
  • The importance of building a cash reserve
  • Four financial goals every business owner should have.
  • Targeting executive compensation
  • Third-party compensation studies
  • Three types of compensation that CEOs should be getting.
  • The number one thing agencies can do to increase profit margins.
  • Best advice: Hire A-Players
  • Habit that contributes to success: Playing strategy games as a kid.
  • Recommended tool: ClickUp
  • Recommended book: The Checklist Manifesto
  • Run time: 34:13

Links:

Quotes:

  • “If you are spending between 0-5% of your revenue on sales and marketing, you are not serious about growth. If you’re spending between 5-10% of your revenue on sales and marketing, you are looking for minor growth. And if you are at 10%+, you care a lot about growth and it’s important to you.”
  • “If you go through every single line item of your P&L, and ask yourself one simple question, ‘is this more important than sales and marketing?’, you will find a lot of money that you can spend on sales and marketing.”
  • “There are two types of revenue, there is gross revenue and there is net revenue. Gross revenue includes all of your pass-through stuff, so if you’re spending money on media, that’s counted. Net revenue is after you remove all of those pass-through numbers. From there, the next area is called cost of service. This is what it takes to service that business.”
  • “When you think about ownership and you think about compensation, there are three types of compensation that you should be getting. The first is a salary. That salary should be commensurate with an independent third-party recommendation of what a CEO should get paid for the size of your business…The second one is if they lend the business money, they should charge interest on that money and it should be commensurate with the level of risk of that business. The third one is your ownership. There is nothing wrong with taking a distribution based on the percentage of ownership that you have in the business.”

Takeaways:

  • Your strategic plan is what you spend your money on.
  • You should have four goals: revenue, profit, cash, and infrastructure.
  • Ensure your goals are in the budget.

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