Agency founders and owners are sometimes the driving force behind their businesses. They shape company culture, ensure growth, and guide strategic initiatives. Indeed, it takes plenty of work for an owner to determine their compensation.
As an agency owner, you’ve probably asked yourself the next questions:
- Am I paying myself enough, or an excessive amount of?
- Do I even have all the information obligatory to determine an adequate compensation plan for my partners and myself?
- Where do I/we stand in comparison with industry peers?
- Should our agency introduce worker ownership options?
As one in every of the leading global project management budget tracking platform, Productive talks to a whole lot of agencies worldwide, week after week. Through time, the team noticed that usually, compensation is spoken about, but mainly for workers. Agency owner compensation is a critical topic that doesn’t get much attention.
Who Participated in the Agency Owner Compensation Survey?
In July and August of 2024, Productive sent out a questionnaire to agency founders and owners across the globe, which 161 respondents participated in. The team wanted to know compensation practices and tendencies higher, plus provide insights that might help agency owners reshape their approach to compensation.Among the responses collected, around one-third of the agencies have one owner and one other third have two owners, followed by 28% of the respondents having 3-5 agency owners.
The majority (80%) of participants are male. Nearly half of the agencies discover as digital agencies (48.4%), followed by software development agencies (11%), consultancies (11.8%), integrated agencies (8.7%), and brand creative studios (around 8%).
Regarding agency size, 65% of the agencies employ between 1-20 full-time employees, while 17% employ 21-30 FTEs. About 54% of agencies report annual revenues between $1-10 million USD.
Additionally, over half (52.2%) of the respondents established their agencies greater than 10 years ago, while roughly 1 / 4 founded theirs 5-10 years ago, and the rest lower than 5 years ago.
What Are Agency Compensations Like in 2024?
From the agencies that accomplished the questionnaire, three out of 5 owners aren’t the individuals earning the very best salaries inside their firms, and 85% report challenges in determining their very own salaries. Approximately 70% of agency owners earn profits from their business, while 30% have implemented some type of bonus system.
There is a noticeable link between an agency’s age and the style of compensation its owners receive. More established agencies are likely to prioritize “stable” income sources like regular salaries, whereas newer agencies more regularly depend on bonuses and dividends as compensation.
Among the 4 kinds of compensation considered, 87% of agency owners receive an everyday salary, while only 41% receive dividends. Additionally, 30% of homeowners receive distributions and bonuses.
One of essentially the most interesting findings of this study is that only 9% of agency owners consider their peers earn higher salaries than them. Looking into overall satisfaction with compensations, one in five agency owners aren’t satisfied with their compensations.
While many founders feel underpaid in comparison with their peers, most actually earn at or above the common for his or her industry, with only a subset truly earning below average. These findings may indicate that founders undervalue their very own compensation or feel pressured to satisfy an assumed income standard.
Over 55% of agencies have introduced an worker stock ownership plan (ESOP). Some agencies require specific criteria that employees have to satisfy to participate in the ownership program, although most agencies offer voluntary entry at specific times.
The Main Challenges in Establishing Agency Owner Compensations
Here are just a few key the reason why agency founders and owners often find it difficult to find out their very own compensation, in addition to that of partners or co-founders:
1. Cash Flow Management
Ensuring a gentle money flow is regularly cited as a top priority, often leading agency owners to delay or forgo their very own financial rewards to maintain the business stable.
“My salary will fluctuate greater than anyone else’s. In a nasty period, I’ll sacrifice my salary. In a great period, I take a bonus.” (Anonymous survey respondent)
2. Differing Perspectives Among Partners
Compensation decisions can change into contentious, especially when co-founders or partners hold differing views on what constitutes fair pay. These disagreements can result in a delay or reduction in personal compensation.
“Business almost imploded after disagreements with the founding partner on our salaries vs. job descriptions. He ended up leaving when faced with realities of business revenues vs. his salary expectations.” (Anonymous survey respondent)
3. Lack of Industry Benchmarks
Many agency founders need more reliable benchmarking data, which may make it difficult to gauge appropriate compensation levels inside their specific industry and business size.
4. Self-Doubt or “Impostor Syndrome”
It’s common for agency owners to experience self-doubt, especially when setting their compensation in comparison with high-performing executives, resulting in hesitation in paying themselves higher salaries.
“When I wasn’t contributing as much, and my top executives knew all of the numbers, having a heavy salary didn’t feel right. We also had some rough months, so I went to a distribution just for a 12 months or two to let my team pull the salaries that they had before I’d distribute money.” (Anonymous survey respondent)
5. Balancing Reinvestment and Personal Income
For many agency owners, there’s a relentless balancing act between reinvesting profits to drive the business’ growth and taking personal income. Even though the impulse is usually to reinvest, this will come at a private financial cost.
How To Solve Agency Owner Compensation Issues?
It’s clear that there is no such thing as a perfect formula for agency owner compensation policies, as we see that:
- 85% of agency owners have an issue defining their very own compensations;
- only 40% of homeowners are satisfied with their salaries;
- and only 9% of agency owners consider they earn higher salaries than their peers.
To solve compensation issues, agency founders should deal with tracking profitability and investments, establishing objective compensation criteria, and setting straightforward methods for handling potential disagreements amongst partners.
The secret’s to remain informed, seek guidance when needed, and make selections that support each what you are promoting goals and private aspirations.
To learn more about this topic, download the 2024 Agency Owner Compensation Report.
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