Gravity Consulting - Jun 15, 2020

Recurring Revenue for Creative Agencies – Part 1


Creative agencies have a problem in that they must constantly look for new projects. Project work can be very interesting, but relying solely on project work presents a number of challenges:
1. Revenue, profitability and cash flow can be volatile. Sometimes cash flow can be very good, while other times there can be a real cash crunch.
2. Obtaining new project-based work requires significant time and resource investments. It can be up to five times more expensive to obtain a new customer than to retain an existing one.
3. It can be difficult to plan long-term staffing—not only due to the unpredictability of the agency’s workload, but also because new clients have unfamiliar budgets.

Recurring revenue

Recurring revenue is revenue that is likely to return in the future. Developing sources of recurring revenue that cover at least some of your monthly fixed costs can have several benefits, including a more predictable cash flow. Doing so can also help you build longer-term customer relationships, which tend to be significantly more profitable over time.

One way of developing recurring revenue are through offering a more specialized or targeted product that can be sold as a subscription. A subscription is then a way of ‘productizing’ your service delivery. A second way is not to ‘productize’ your service offering, but to deliver actual products as a side offering. Thirdly, you can offer subscriptions, not by specializing on a specific niche, but by changing the delivery of the same services.


The most common type of recurring revenue is subscriptions, with some of the most well-known examples being cloud storage solutions (like Dropbox) and software services (like Adobe Creative Cloud). But businesses across the board are increasingly utilizing subscription-based models, with other notable examples including rentals, home maintenance, and IT services and repair.
Subscriptions have also become increasingly important for digital marketing firms, which frequently offer monthly packages containing pre-defined bundles of services that are offered for a set, recurring fee. These bundles usually include an allocation of the agency’s normal suite of offerings, such as digital advertising, content marketing, social media management, graphic design and branding.
Almost every aspect of your business can be sold via subscription. One key for doing so is to ‘productize’ your service offerings, which is described in more detail later in this article.

New Products

In addition to (or instead of) ‘productizing’ your services, consider selling products. This approach is less common, but can be embraced by creative agencies for which offering monthly ‘packages’ is either unrealistic or something the owner simply doesn’t want to do.
If you are a design or marketing firm that sells to corporate clients, which in turn sells to consumers, you will not have direct knowledge of the consumer market. I have seen examples of marketing firms that have a side business selling select consumer products, which can be viewed as a firm spreading itself too thin. However, if done right, it can accomplish several things:
– It can show potential corporate clients that the firm really knows what clients are trying to accomplish. For example, the marketing firm can tell its potential clients, “we know how to sell to millennials, because we do it.”
– It can provide an additional, steady stream of revenue that’s not subject to the fluctuations of project revenue.
– It can increase brand awareness, which raises the value of the firm.
Some marketing firms specialize in one industry. For example, some only market to pharmaceutical companies, utility companies, or government entities. Whatever the industry is, it almost certainly holds events.
I have seen marketing firms hold conferences for the industries they target, or for their industries’ target audiences (or consumers). For example, a marketing firm with pharmaceutical clients might hold a conference for physicians, or a wellness summit aimed at patients with the types of conditions those companies’ products treat.
If an industry conference is already well established, there are ways to piggy-back on that conference. One example I have seen is for a design company to create a booklet, magazine, or video for that conference.

Change in Service Delivery Model

Another way is to change the service delivery model. Instead of offering various project-based services, some marketing firms are basically saying: let us be you part -time CMO and CTO. We will offer you various packages of x hours per month that will be used for anything marketing related. If you need less, we will reduce our involvement and if you need more, it will go up. We will not count the number of hours and the precise number of hours may vary a little from month to month.

The value for the customer, which may be on the smaller side, is that marketing services are becoming very specialized and they alone may not know what is needed. In the absence of a dedicated CMO, a marketing firm that does fulfills that function can valuable.