“I know these huge agencies that scrape buy with a 6 or 7 percent margin. My friend has 160 contractors on his team and has designed his business so that his margin is well over the normal range,” Kent told me.

Kent’s a former agency owner that I met with for drinks last night. We talked about a lot of things, but one of the topics we dove into was the ideal agency business model. His perspective was to reverse engineer backwards from the margin you’re looking to achieve (“begin with the end in mind”- see yesterday’s blog.)

When Kent told me about his friend I said, “I like that. Many small businesses struggle to be profitable. He’s flipped the equation so that it’s hard not to be profitable.”

Of course, it’s easier said than done.

Kent’s friend achieved his margin by charging market rates and offshoring and automating the operations of his agency.

The two levers to pull are pricing and cost to deliver.

One level deeper, pricing is manipulated by positioning, marketing, and sales. Cost to deliver is manipulated through systems design and your capability to staff the right people.

Is Kent’s friend spending his time sailing his yacht around Greece? No. Instead he has reinvested a significant portion of the profit back into the business in order to grow. That’s why profit is important when it comes to growth. When you’re highly profitable, you have the option for reinvestment without strings attached or risk incurred.

Featured image is Venus at the Mirror, 1613–14 by Peter Paul Rubens. The term “rubenesque” refers to the style of people he painted which were meant to be attractively plump. Used under public domain.