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While most of us are obsessed with the creative and strategy side of the business, the harsh reality is that agencies succeed or fail based on their operational competence. 

For this recent episode of Inspiring Futures, I spent time talking to Nick Avaria. 

Nick has owned his own agency, and he also buys agencies and consults with them to help them improve operations. 

Here are some of the highlights of our conversation. 

The agency landscape has transformed. 

Where generalist agencies once dominated through geographic proximity, today's winners are specialized, systematized, and financially disciplined.

The Numbers that Matter 

Agency finances are simple: Revenue minus pass-through costs equals Agency Gross Income (AGI). 

People costs should consume maximum 45% of AGI (30% billable, 15% admin). 

SG&A should range 20-25%. 

This formula yields 30-35% profit margins—increasingly achievable in today's remote-first environment.

According to Nick, most agencies fail by providing "Michelin star service at McDonald's prices." 

The solution isn't cutting quality but is all about being able to align price with value.

Specialization to Survive 

In 2012, only 20% of agencies were specialized; today it's 70%. 

Specialists command premium pricing because they deliver results in weeks, not months. 

They skip expensive discovery phases, leveraging "institutional knowledge"—accumulated expertise that becomes an unassailable moat.

The agency handling only Google Ads for personal injury lawyers doesn't need three months of strategy. 

They know what works. This expertise enables premium pricing while reducing delivery time.

The Operations Gap 

Most agencies are "relationship driven, not systems driven." 

Every handoff fails.

Every project reinvents wheels. Results: inconsistent quality, evaporating margins.

The fix requires two feedback loops: systematized client experience (onboarding, expectations, education) and standardized delivery (dashboards, SOPs, training). 

These unglamorous systems separate scalable agencies from those that implode.

What It Takes to Be Sold 

For maximum valuation: maintain 30-35% profit margins while growing AGI 30-35% annually. 

Achieve $1M+ EBITDA for 6-9x multiples.

Build 2+ year client retention. Create owner-independent systems.

Winners have transformed from creative shops into operationally excellent businesses. 

They've chosen their lane—vertical, service, or both—and built expertise others can't match.

What it Takes

Today, rewards neither generalists nor operational chaos behind creative brilliance. Success requires specialized expertise, systematic delivery, positioning, and financial discipline.

Agencies can't thrive on talent alone. 

They need systems capturing talent's impact, positioning commanding appropriate pricing, and discipline ensuring every dollar builds a sellable asset. 

Creative magic still matters, but it has to be wrapped in a sound business model.