As with all growth formulae however, we fully recognise that stating it is simple & applying it is hard.

This post alone will not guarantee you the ability to grow your micro-agency beyond the quarter-million mark. 

What it will do is build out the meaning of the words of our formula & how they apply to micro-agencies.

The first thing to recognise is that growth can mean different things to different people. 

But having worked with 20+ micro-agencies, we can safely say that none of them wanted to remain in the <£250k turnover bracket!

Their ambitions vary greatly from £500k lifestyle businesses to £5m+ saleable assets, but whatever their end-goals, each agency owner wanted to see their business grow in turnover.

There is so much more to growth than just turnover of course, and far too many facets to detail them all here, but for the purposes of this post, we will use the word “growth” to mean “profitable turnover growth”.

Time & Money are the two currencies you need to spend to buy growth in your micro-agency. Exhaust either of them entirely, and the whole project falls apart.

But as with any other currencies, investing them wisely brings great returns.

And investing them even more wisely enables them to benefit one another exponentially.

By way of example, consider the two potential routes to completing a client project - selling the project will help to deliver growth, and to get that growth, you need to invest:

Route 1: Do it yourself
‍This is an investment of Time - it costs you nothing in Money to do this, but likely significant Time.

‍Route 2: Have someone else do it
‍This is an investment of Money (primarily) - it will cost you some Time as well to project-manage whoever is doing the work, but Money is the bulk of the investment.

And to grow your way out of micro-agency status, you’ll need to choose the right investments at the right time.

Time is the very first investment of any agency. Brand-new service businesses tend to have very little in the way of start-up costs, and they are built initially off the back of the labour of the owner(s).

At the outset of the agency, Time is the abundant currency. There is little or no Money in the business at this stage and therefore only Time can be invested to aid Growth.

As the client-base of the agency expands however, so does the complexity of running it. The realisation that you are the CEO, CFO, CTO & CMO of the business strikes, and so the abundance of Time that you once had seems to dissipate.

By this stage of the journey, you will need to have generated enough Money to invest in the business to balance out that lack of Time. More on that below!

When you first realise that you cannot possibly get everything accomplished without working 24 / 7, your gut reaction will be to spend Money to solve your problems.

You will dream of hiring technical specialists to handle client work, account managers to handle client needs, and marketing & finance specialists to take those non-billable elements off your hands too.

And whilst it may seem like this is the solution to all of your problems, what is more likely is that you will create a whole lot more!

Bringing others onboard to ease your Time woes will be necessary for sure, but how you do it will define whether you are successful or not.

And failing to properly prepare your business for the arrival of new team members will only result in a shift of the Time problem:

So whilst there is always a Time investment required with new team members, getting detailed, documented Processes in place will significantly lessen it. And on top of that, those Processes will enable a shorter time-to-revenue for those new team members too - a vitally important measure in any micro-agency.

Those Processes are your preeminent means of generating Time within your agency. They ensure that the day-to-day operation of the business can be carried out without your direct input. And most critically, that the decision-making of your team aligns as closely as possible with your own, removing you as both a blocker & a singular point of failure.

With proper Processes in place, you should expect your team to make the same decision that you would 9 times out of 10.

And why not 10 times out of 10?

Firstly, this is not an exercise in perfection. If you want to gain Time, you have to be willing to trade something for it. One part of that trade is the Money invested in the people you bring in. The other part is control. If you cannot accept others’ making decisions that you would not, you will never achieve a significant gain in Time. And if you cannot make a significant in Time, you will almost certainly stunt your agency’s growth.

Secondly, the assumption that the 10 out of 10 option makes is that your decisions would be the best decisions. As an owner myself, I can wholeheartedly say that not all of my decisions have been the best ones. And nor will they ever be. So you may find that the 1 out of 10 decisions that goes against how you would have done it is in fact the better decision!

At the outset of a new agency, Money is fairly unimportant. The costs of the business are negligible as the founder & (usually sole) director is doing all of the work. They are paid through dividends from profit, and with no meaningful costs otherwise, almost all revenue is profit.

As such, understanding the different types of Money is also viewed as fairly unimportant.

The tipping point for the new agency tends to arrive somewhere between the £70-100k mark however. At this stage, the agency is starting to reach the limit of what the founder is capable of delivering on their own (as a pseudo-freelancer) & therefore the question of bringing in other resources arises.

At this stage, the deployment of Money as a Growth-fuelling resource becomes a necessity. And with it, so does the understanding of the different types of Money & how to view them.

So, in a nutshell, here are the three types of Money:

Revenue: this is the Money that you request from clients when you send an invoice. But until that Money is paid to you, it is effectively useless. Sending 100 invoices for £1k will make your accountancy software believe that you have a £100k business - but if they are sent to fictitious clients or people who will never pay, you in fact have a £0k business! So in essence, all Revenue in agencies is a promise, until it is converted to Cash.

‍Profit: this is the Money you have left over from your Revenue after all expenses have been paid. There are multiple different types of Profit too, but for the purposes of this explanation, we will use one; Distributable Profit. This is the Money that you as an owner can pay yourself in the form of dividends. So for the remainder of this post, if we reference “Profit”, we’re talking about the Distributable kind.

‍Cash: this is Money that you can actually use right now. It is the liquid cash that you have in your company bank account that can be deployed to assist with your Growth. So whilst Revenue is distinctly nebulous, and Profit is a derived figure based on ever-shifting factors, Cash is a cold hard number - either it is there in your bank account to use, or it is not. Cash is the Money that keeps your agency going. When businesses go under, it isn’t because they don’t have Revenue or Profit even, it’s because they run out of Cash to pay their bills, causing a default.

Now that we’ve got the definitions out of the way, let’s talk generation:

With the definitions above in mind, Money can be viewed quite simply:

As such, Revenue is merely a means to an end, not the end itself.

So for the remainder of this section, we won’t be focusing on how to generate Revenue, but rather how to generate Cash & Profit & here’s why:

As discussed above, when you started your agency, there was no Money & therefore it did not represent an opportunity to deploy it for Growth.

Once you start to breach that £70-100k turnover run-rate however, the abundance of Time that you had to drive the Growth of your business will start to dry up, and your thoughts will turn to deploying Money to keep the momentum going.

And that is exactly what will be necessary.

Time for a few lessons on how to do that effectively.

1. You don’t spend Revenue, you spend Profit

One of the biggest misunderstandings in micro-agency Money is that when you choose to spend, you’re spending your Revenue.

You aren’t, you’re spending Profit.

Every penny that you pay out for new team members, new tech, new suppliers etc. is a penny that you can no longer pay yourself.

So you’re spending Profit, not Revenue.

Remembering that every expenditure in your agency is effectively coming out of your own pocket is a great way to force yourself to consider whether it is really necessary!

2. Profit comes from planning, not by accident

When you’re just starting out, Profit is simply a by-product of Revenue; with virtually no costs, it just happens.

Once you start deploying your Money to bring other resources into the team however, you need to plan your services to be profitable.

You need to know what your team costs & what a client is paying for them in return. And whether you charge by the day or not, you still have an effective day rate that a client pays; i.e. the total cost of the project divided by the number of days work that it took your team to do.

Add in your overheads (i.e. non-billable costs) in too, and now you really know what it costs your agency to service a day’s work for any client.

So you can set your prices with a profit margin attached - thus your Profit is planned, not accidental.

3. Cash is different & should be treated differently

Revenue is dictated by you; if you send an invoice, Revenue is generated.

Profit is also dictated by you; to a lesser extent, but if you set your prices as above, you will make a profit on the work that you do.

Cash however, is dictated by others; you cannot control exactly when a client will pay you. And as discussed above, Cash is the type of Money that your agency will live & die by.

So the management of your Cash requires wholly different processes to the other Money types.

4. Cash comes from attention-to-detail

You cannot control when a client pays you. But you can set out conditions & processes that will increase the likelihood of you being Cash-positive.

1. Get cashflow planning software; spreadsheets won’t be granular enough, even for a micro-agency

2. Set reasonable payment terms; 14 days is more than sufficient in the era of online banking, and NEVER agree to more than 30

3. If you’re project-based, you can spread out payments based on time, NOT on progress; that takes all of your power away & leaves you at the mercy of the client

4. Set up automated reminders for your invoices via your accountancy software

5. Be prepared to, and have a plan for how you will, chase up late payers - they who shout loudest get paid first!

Time & Money are your currencies for Growth; not enough of either can throttle your expansion.

But deployed correctly, they are all your agency needs to move forward.

Understanding how to generate those currencies, in their varying forms, will give a big headstart on other micro-agencies.

And before long, you’ll be leaving that moniker behind. Permanently.