In the dynamic world of creative agencies, understanding the business model is like holding a map in the labyrinth of profitability and growth. This isn’t just about selling services; it’s a sophisticated dance between providing unparalleled creative solutions and managing the intricacies of commissions from buying and selling goods for clients. Let’s dive deeper into the essentials of agency business models, agency revenue streams, and cash flow, using expert insights!  

In a recent episode of GYDA Talks titled “Stepping Outside the Agency Bubble: Eye-Opening Insights from a Former CEO“, Rob Craven from GYDA had a fascinating chat with our CEO Marek Mrazik. Their conversation peeled back the layers of what it takes to thrive in this dynamic industry.

The Hybrid Business Model: Rely on more Agency Revenue Streams

Picture the traditional service-based industries like a serene lake, where law, consulting or IT firms swim in the clear-cut stream of selling their expertise. Now, imagine the creative agency as the sea, where under its seemingly calm surface, currents of dual agency revenue streams flow with complexity and opportunity. Agencies do not solely thrive on the shores of selling services; they dive deep into the ocean of buying and selling goods for clients, often navigating the treacherous waves of media commissions or delayed client payments.

Allfred CEO Marek Mrazik brings an interesting perspective to the table in a recent podcast: How can ad agencies operate more effectively under a hybrid business model?

It’s not just about crafting campaigns; it’s about the art of buying production and media, then selling these with a commission. This blend creates a vibrant tapestry of revenue streams, offering a steady flow of income that, if managed correctly, can significantly buoy an agency’s financial health. Yet, without the right operational controls, this can quickly turn into a turbulent storm, threatening to capsize cash flow.

Three Models of Selling Production and Media

Agencies have traditionally navigated between different models for selling production and media, each with its unique advantages and challenges. Understanding these models is key to aligning your agency’s financial strategies with client expectations and market dynamics. Let’s explore three prevalent models and delve deeper into why the hybrid pricing model is increasingly becoming a go-to strategy for agencies.

#1 Cost-Plus Pricing

Here, agencies sell media at the cost they buy, adding a charge for their services. This model is transparent but can be less profitable.

#2 Commission-Based

Agencies include their service fees within the commission, making it a one-stop pricing model. It simplifies client billing but can reduce the perceived value of the agency’s services.

#3 Hybrid Pricing

Marek advocates for this model, combining service fees with a modest commission. “Every hour you spend managing the media should be paid by the client,” Marek advises, adding that a small commission covers the risks and costs associated with media management. This approach balances profitability with client trust.

The Importance of Hybrid Pricing for Agencies

Charging a small commission on media, in addition to being compensated for every hour spent managing it, is more than just financial prudence. It’s about taking responsibility for the media investments and covering the risks associated with overspending. This approach not only safeguards the agency’s financial health but also positions it as a responsible and reliable partner in the client’s eyes.

Benefits of Hybrid Pricing

  • Balanced Agency Revenue Stream: Hybrid pricing combines steady revenue from service fees with variable commission income, providing a more balanced and reliable agency revenue stream.
  • Risk Mitigation: The commission aspect helps offset risks associated with media management and overspending, safeguarding the agency’s financial health.
  • Enhanced Client Trust: By charging for actual hours worked and a modest commission, agencies demonstrate a commitment to transparency and accountability, fostering deeper trust with clients.
  • Flexibility in Client Negotiations: This model offers flexibility to adapt to different client needs and budgets, making it easier to negotiate and maintain client relationships.

Hybrid pricing is more than a financial strategy; it’s a comprehensive approach that aligns with modern agency-client relationships. It respects the agency’s need for a stable revenue stream while acknowledging the client’s desire for transparency and accountability. Agencies adopting this model not only secure their financial footing but also position themselves as adaptable and client-focused partners.


While the benefits of hybrid pricing are significant, it’s crucial to approach this model with a mindful strategy. Here are some key considerations or ‘watchouts’ that agencies need to bear in mind to effectively implement this model:

  • Clear Communication: Agencies must clearly communicate the rationale behind this pricing structure to avoid confusion or mistrust.
  • Managing Expectations: It’s crucial to set and manage realistic expectations regarding media spends and the associated commission charges.
  • Consistent Service Quality: The value of services must match the pricing, ensuring clients feel they are getting their money’s worth.

How Can Agency Revenue Streams Affect Your Cashflow

Understanding and managing the various agency revenue streams is pivotal for maintaining a healthy cash flow. Here, we spotlight how different streams, especially commissions from media buys, can impact your financial equilibrium and the strategies to address these effects.

Impact of Agency Revenue Streams on Cash Flow

#1 Commissions from Media Buys

While commissions can be a significant source of income, the upfront costs for media purchases may create cash flow gaps.

Solution: Develop strategies such as negotiating longer payment terms with media suppliers and requiring client prepayments or deposits. This approach aligns your cash outflows with your inflows, easing the pressure on your cash flow.

#2 Fluctuating Project Fees

Income from project-based work can vary greatly, leading to an unstable cash flow.

Solution: Counterbalance this unpredictability by integrating more stable revenue streams like retainers or recurring services. Implement detailed financial forecasting to navigate through these variable inflows.

#3 Steady Retainer Agreements

Retainers offer a consistent and predictable agency revenue stream, stabilizing your cash flow.

Solution: Strive for a balanced mix of project work and retainer clients to maintain a regular inflow of funds, offsetting the unpredictability of project fees.

#4 Delayed Payments from Clients

Late payments can disrupt your cash flow management, creating mismatches in income and expenses.

Solution: Enforce clear payment terms with penalties for late payments and consider incentives for early payments to prompt timely client settlements.

#5 Seasonal Variations in Demand

Seasonal peaks and troughs can cause inconsistent cash flow, making financial planning challenging.

Solution: Adapt your budget to account for these seasonal trends and diversify your client base to reduce reliance on any single industry or market segment.

#6 Unexpected Expenses

Sudden and unplanned costs can strain your cash reserves.

Solution: Establish an emergency fund that covers several months of operational expenses and perform regular financial audits to identify and mitigate risks.

The Significance of Agency Revenue Stream Management

Effective management of these varied revenue streams is key to ensuring a robust cash flow. By recognizing the specific challenges each stream poses and adopting appropriate strategies, agencies can create a stable financial environment conducive to growth.

For more insights into effective pricing strategies and operational management in creative agencies, our full podcast discussion offers a wealth of knowledge. Listen now to enhance your agency’s profitability by effectively managing revenue streams.