The Agency Owner's Guide to Smarter Money Management

Picture this:

You’re a hardworking creative agency owner who has finally gotten the business to that $500K in revenue milestone. You’ve managed to make it this far without any major mishaps, and are satisfied with the size of your savings account. 

Because things progressed so quickly, you have a hard time picturing what your financial future looks like, but because you’ve got enough money in the bank for a rainy day you’re not too worried about it. 

Sound familiar? 

As a creative agency owner, you've likely built your business on your artistic talents and passion, not financial wizardry. But as your agency grows, it's time to embrace a smarter approach, one that allows your money to work for you. Relying solely on client revenue isn't enough to reach your true potential.

Investing 101

“Investing” is a complex topic that shouldn’t be navigated alone. While it's recommended to work with a financial professional to manage your assets according to your specific situation, the fundamental principle remains the same: investing your money helps you generate more earnings.

But how do you know where to invest? Should you invest in a few places or many to diversify your portfolio? How much should you set aside for future or personal emergencies? Or how much to invest back into your agency? 

If you struggle with the financial side of agency ownership, you're not alone. Initially, when starting a new agency, reinvesting in the business takes priority. Investing revenue back into expanding the team, process enhancements and lead generation are essential to gain momentum and start to turn profits. For example, you may have previously invested in:

• Marketing initiatives to attract new clients and expand your reach.
• Employee training and development to enhance their skills and productivity.
• Technology and software to streamline operations and improve efficiency.
• Research and development to stay ahead of industry trends and offer innovative solutions.
• Strategic partnerships or acquisitions to expand your service offerings.
• Branding and design to establish a strong presence and attract high-value clients.

However, once you reach a certain level (typically $500K+ in annual revenue), strategic money management becomes crucial to avoid missed opportunities.

Diversification: The Key to Managing Risk and Maximizing Returns

If you’re currently keeping your hard-earned cash stowed away in a bank account, you’re seriously restricting your agency’s financial future. Instead, consider moving your money into a variety of short and long-term investments so you can grow your bank account while minimizing risk.

Let’s consider an example agency owner, Sarah, who has chosen to diversify their investment portfolio:

1. Safety net: You need to keep a safety net of savings in place at all times for emergencies or unexpected downturns. For example, consider an agency owner named Sarah who set aside $50,000 as her safety net. This provided stability and peace of mind despite a difficult year in the industry.
2. Short-term investments (yields a return within 1-3 years): Sarah also invested $30,000 in bonds and $20,000 in a high-yield interest account. The bonds provided a fixed income stream, while the high-yield interest account provided competitive interest rates. In just three years, Sarah saw her investments grow by 7%.
3. Mid-term investments (yields a return within 3-10 years): As her agency's revenue grew, Sarah expanded her investment portfolio. She allocated $100,000 to a diversified mix of annuities, stocks, bonds, and mutual funds to strike a balance between risk and reward. Over six years, Sarah witnessed her investments increase by 15%.
4. Long-term investments (yields a return within 10+ years): Looking toward the future, Sarah decided to invest $200,000 in a retirement plan and $150,000 in real estate. The retirement plan provided tax advantages and helped Sarah save for her future, while the real estate property generated rental income and appreciated over time. After a decade, Sarah's investments in retirement and real estate had grown by 25%.

As you can see, choosing to invest her money paid off for Sarah. By diversifying her investments instead of keeping her cash in a bank account, she was able to yield $130K. Her investment strategy allowed her to maintain a safety net, generate short-term returns, and build long-term wealth.

Investing as your key to scalable success

While having a bank account full of cash may seem like the best, risk-free way to control your money, it is the slowest way to build both personal and generational wealth. Thanks to inflation and taxes, money just sitting in a bank account could be costing you up to 11% per year (tens of thousands of dollars you could be reinvesting into your business instead). 

Don't let your agency's hard-earned cash languish in a stagnant bank account. Instead, embrace the power of strategic investing and unlock the potential to make your money work for you. 

As a creative professional, it's understandable to feel overwhelmed by the world of finance. But by educating yourself, seeking professional guidance, and diversifying your investments, you can pave the way for greater financial growth and success. Connect to a financial professional today, and take control of your agency's financial future. The path to maximizing your cash flow begins with strategic investments.