New research reveals key marketing agency growth challenges that agencies faced in 2023 – and based on conversations I’ve had with agency owners, those challenges continue into 2024.
If you're an agency owner, you might have already felt it: deals are taking longer to close, profit margins are tightening, and growth isn’t as predictable as it used to be.
But here’s the good news: these challenges aren’t random. They’re preventable—if you focus on the right strategies.
Before we dive into solutions, let’s set the scene with key insights from the annual agency benchmark report from The Wow Company, a UK-based accounting firm specialising in marketing agencies and consulting firms.
For 13 years, The Wow Company’s annual BenchPress study has tracked trends in agency growth, profitability, and challenges. And while the data is UK-centric, it aligns closely with what I see every week as a specialist business coach working with Australian and US-based agencies.
The 2023 AgencyAnalytics Benchmarks Report, covering North America and Australian digital marketing agencies, confirms similar trends—making this a global conversation.
Marketing Agency Benchmark Report: Key Insights
Agency Growth Declined Significantly in 2023
54% of £1M+ agencies grew fee income in 2023—down from 78% in 2022 (a 31% drop in 12 months).
This decline is nearly as severe as 2020, when COVID first hit—when only 49% of agencies managed to grow.
Smaller agencies faced a similar trend:
52% of agencies under £1M grew in 2023—down from 71% in 2022 and barely above the 49% growth rate in 2020.
Operating Profit is Trending Downwards
For marketing agency growth, profitability is key. However, the number of £1M+ agencies making more than 10% operating profit has dropped from 71% in 2021 to 51% in 2023
2021: 71% of agencies
2023: 51% of agencies
2021: 66% of agencies under £1M made 10%+ profit
2023: Only 44% now achieve this
Why is this happening?
While average gross profit percentages remained steady, several factors ate into profits:
- One-off redundancy costs
- Fixed operational costs (e.g., office rent), even as revenue declined
- Increased salaries for agency owners to keep pace with the rising cost of living
Next Steps
This data confirms what many agency owners already feel: growth is harder, profit is shrinking, and cash flow is tightening.
But it also reveals something else—agencies that take proactive steps to improve positioning, pricing, and lead generation are outperforming the market.
The key question now is: What are the best-performing agencies doing differently?
Let’s dive deeper into the biggest new business challenges for agencies in 2024—and how to overcome them.
Want to Increase your Gross Profit?
If you want to run a more profitable agency, you need to focus on profitability metrics—not just revenue growth. Many agency owners set revenue targets but fail to track profitability as a priority.
Here’s how to increase your agency’s gross profit:
- Set profit targets, not just revenue goals. Revenue growth without profitability is a dangerous trap. Set a gross profit margin goal of 50%+ to ensure your agency remains financially sustainable.
- Measure profit more often. Agencies that track gross profit monthly tend to grow faster and maintain higher profitability than those that only review finances annually. The most successful agencies measure profitability per client or per project to make data-driven decisions.
- Increase your fees. The best-performing agencies charge more by improving their positioning, differentiating their services, and using value-based pricing. If your agency looks like every other competitor, you'll be forced to compete on price. Most of the agencies I work with can double their fees by making a few strategic changes in their pricing approach.
Cash Reserves are Tightening
With growth slowing and profit margins shrinking, agencies are also seeing a drop in cash reserves.
Among £1M+ agencies, the percentage of businesses with at least three months of overheads in cash reserves dropped by 10% in the last year. Now, fewer than half of agencies (47%) have this financial cushion.
Confidence Levels have Increased
Despite financial pressures, many agency founders are feeling more confident about the future.
Why?
The challenges of 2023 forced agencies to streamline operations, get leaner, and refocus on growth strategies. This shift has increased confidence levels across the industry.
This trend is also reflected in the 2023 AgencyAnalytics Benchmarks Report, where 84% of agency owners reported feeling either “Very Optimistic” or “Quite Optimistic” about the future.
The Biggest Challenge in 2024: Winning New Business
Client acquisition is the foundation of marketing agency growth, and in 2024, it’s more important than ever.
For £1M+ agencies, winning new business has become a top priority, rising from 27% to 40% in just one year—a 48% increase.
While profitability and working “on” the business remain key concerns, cash flow issues have now surpassed recruitment as a major pain point.
How Does This Compare to the Previous Year?
In 2023, the biggest challenges for £1M+ agencies were:
- Recruitment
- Winning New Business
- Too Busy Working IN the Business
This shift highlights the growing urgency around sales and lead generation—a trend seen across agencies of all sizes.
For agencies under £1M, the focus on new client acquisition has also risen, increasing from 31% to 41% in just one year.
Cash flow and profitability are also among the top concerns. However, 24% of agency owners feel “too busy working in the business” to address these challenges effectively.
How Does This Compare to the Previous Year?
In 2023, the biggest challenges for agencies under £1M were:
- Too Busy Working IN the Business
- Winning New Business
- Recruitment
This shift aligns with the findings from the 2023 AgencyAnalytics Benchmarks Report, where 37% of agencies identified customer acquisition as their primary challenge.
Top 4 New Business Challenges for Agencies in 2024
Winning new business has become the biggest challenge for agencies in 2024, with a noticeable increase in client delays, price sensitivity, and shrinking budgets.
The #1 Challenge for £1M+ Agencies: Delayed Decisions
For agencies with £1M+ revenue, the most significant new business challenge is clients delaying decisions—which has increased from 33% last year to 56%.
Additional barriers include:
- Price sensitivity—clients negotiating harder and pushing for discounts.
- Budget constraints—more agencies reporting that prospects simply don’t have the budget to proceed.
- Lack of leads—a growing issue as competition increases.
- Harder to get attention—twice as many agencies are struggling to open doors.
The #1 Challenge for Agencies Under £1M: Lack of Time for New Business
For smaller agencies, the biggest hurdle is not spending enough time on new business.
Other rising concerns include:
- Lack of leads, which has jumped from 31% last year to 49%.
- Delayed decisions, rising from 33% to 47%.
Want to Build Your New Business Pipeline?
If new business feels inconsistent, here’s how to build a more reliable pipeline:
- Set clear targets for marketing agency growth. Sounds obvious, but you’d be surprised how many agency owners don’t track how many leads they need to meet revenue goals. Work backward from your sales funnel conversion metrics to determine exactly how many leads you need per month.
- Develop a New Business Plan. Agencies that plan ahead have higher conversion rates, better client quality, and stronger profit margins than those who run month-to-month without a structured sales strategy.
- Execute consistently. Success is about long-term consistency—not short bursts of lead generation. Break your plan into daily, weekly, and monthly activities to ensure new business stays a priority.
Track, measure, optimize. You can’t improve what you don’t measure. Agencies that track their marketing and sales performance daily, weekly, and monthly consistently see better results.
Over Reliance on Referrals for Client Acquisition
The importance of referrals has almost doubled in the last 12 months for £1M+ agencies, up from 38% a year ago, to 69%.
Other sources include:
- Referrals from suppliers (40%)
- Referrals from agencies/freelancers (19%)
While referrals are valuable, marketing agency growth requires a proactive lead generation strategy.
For agencies under £1M, word-of-mouth remains the #1 lead source, increasing from 45% to 63%.
While referrals offer higher conversion rates and shorter sales cycles, they come with significant limitations:
- Unpredictable—you can’t control when (or if) they happen.
- Not scalable—you can’t grow predictably without outbound sales or marketing.
- Limits pricing power—referral clients often expect the same rates as the person who referred them.
Word-of-mouth should be the icing on the cake—not your main acquisition strategy. If you want sustainable growth, you need a scalable new business plan.
Differentiation Leads to Higher Conversion Rates
The BenchPress annual agency benchmark study confirms that differentiation is one of the biggest drivers of marketing agency growth, significantly improving conversion rates:
- Agencies with a highly differentiated position are nearly twice as likely to have a 40%+ conversion rate.
- Agencies with a clear specialty are twice as likely to experience fast growth (+26% fee income) and high profitability (+61% gross profit).
Yet, most agencies avoid specialization because they fear it limits opportunity.
The Reality? Specialists Earn More Than Generalists.
Specialization makes everything easier:
- Attracting high-value clients willing to pay more.
- Generating leads—a clear, focused message converts faster.
- Closing sales—your value is clearer, so you don’t compete on price.
- Scaling operations—a niche service offering simplifies delivery.
If you want faster growth, higher profits, and better clients, specialization is the fastest way to get there.
Too Long; Didn't Read? (TL;DR)
- Agency growth rates declined significantly in 2023
- Winning new business is now the #1 challenge for agencies (+48% YoY)
- Top challenges include delayed decisions, price sensitivity, and lack of leads
- Fastest-growing, most profitable agencies:
- Are not dependent on referrals
- Have a structured new business plan
- Have clear differentiation (specialization)
- Charge higher fees
The good news?
These challenges are preventable. If marketing agency growth is your priority this year, let's map out a clear, scalable plan — schedule a Brainstorm Call today.
