2023 Agency Analysis:

People, Profits, and

Projections
Jan 2024

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How did agencies do in 2023?
We thought it would be interesting to pulse-check agency owners
inside of Hampton’s private community to better understand how
they fared in 2023. We polled dozens of agency founders and
analyzed the data to create this report.

Here’s a sneak peek at what you’ll learn:

Revenue and profitability breakdowns for 30 agencies

Service breakdown and contractors & FTE splits
General sentiment for 2023, and more!

This report will give you a better understanding of how the last year
affected agencies at large, and help you make informed decisions in
growing your own agency business in 2024. At the end of this report,
you can also find the raw data we used.

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Table of Contents
Location & Service Breakdown...................4
Agencies by Revenue....................................5
FTE and Profit Margins.................................6
Revenue Per Employee Graphed................7
Sentiment........................................................8
The Raw Data..................................................9
In Summary.....................................................14

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Location & Service Breakdown Canada
23.3%

For this report, we surveyed 50+ agencies and

after removing outliers and bad data we selected
30 agencies to analyze. Fully Remote
6.7%
US
60%
Over 80% of the agencies we selected were Other
based in the US or Canada and the rest were 10%

based outside of North America or described

Other SEO
themselves as fully remote. 10% 10%

In terms of services offered,

Development/Design, Marketing, and Consulting Consulting
23.3% Marketing Services
made up the majority of our sample size with SEO 26.7%
and Others taking another 10% each.

Development / Design
30% 4
Agencies by Revenue
About half the agencies we spoke with reported Agencies that offered consulting services
that their revenue for 2023 was between $2m generated by far the most revenue, nearly
and $5m. The other half was pretty evenly split doubling the next highest category - Marketing
up between the rest of the revenue ranges. Services.

$12,000,000

14
$10,000,000
12

$8,000,000
10

8 $6,000,000

6
$4,000,000

4
$2,000,000
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FTEs and Profit Margins
Interestingly, agencies with the lowest profit margin were the ones that generated between $5 and
$10m in revenue. Our analysis found that margins dropped as revenue increased but there was an
uptick once revenue passed $10m.

Including contractors did not $1m - $2m $2m - $5m $5m - $10m $10m+
have a massive effect on RPE
(revenue per employee) for avg FTE 16 24 34 53
most agencies, except for
those doing $10m+.
avg RPE $146K $182K $216K $476K
On average these agencies had
a much larger contractor force avg RPE $137K $149K $150K $264K
compared to smaller agencies (+ contractors)
which reduced RPE by 55%!
avg margin 27.8% 20.7% 14.9% 18.8%

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Revenue Per Employee Graphed
$20,000,000 Overlapping revenue with the number of
FTEs, we unsurprisingly see that in general,
as revenue increased so did the number of
FTEs.
$15,000,000

That being said, some agencies bucked this

trend, mostly thanks to large teams of
contractors.
$10,000,000

The spikes you see in FTEs come from

agencies that have offshored their teams,
$5,000,000
allowing them to maintain a high team
count without necessarily requiring a ton
of revenue.

$0
3

19

7
13

23
25

29
5

9
4

15
7

17

27
2

21
11
1

8
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Sentiment
Overall, the general sentiment from agency owners was mixed,
leaning towards negative.

Many agency owners faced challenges in 2023:

rapid growth leading to operational difficulties

lower than expected revenues
issues with profitability & maintaining healthy margins

A consistent theme was that many agencies experienced rapid

growth in 2022, hired aggressively to meet the demand, and then
experienced a slowdown in 2023 reducing profitability.

While their mood may be tense at the moment, many agency owners
nonetheless expressed cautious optimism for the future with plans
to restructure, focus on more lucrative contracts, and improve
operational efficiencies.
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 The Raw Data
In the following pages you will find the raw data we used for this
analysis organized by revenue.

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 2023 2023 FTE /
Location Main Service Comments
Revenue Profit Contractors

1 $1.2M $150K 7/1 Texas Digital Marketing Goal is $200k per employee, not there yet but working toward it.

2 $1.4M $400K 46 / 2 Québec, Canada Shopify Development All full time employees are overseas hence the high count

Design &
3 $1.6M $850K 9/0 Florida
Development
N/A

We grew so fast in 2022 that we just hired people like mad. 2023 was all
about ensuring our numbers make sense, which is why the numbers look
4 $1.6M - 14 / 5 California Email Marketing terrible. We are still figuring out this puzzle piece and where we struggle
the most

Software
5 $1.9M $475K 12 / 0 Arizona Development
Our revenue per system architect is $540,000

Software Our toughest year ever. Our revenue per employee should be much higher
6 $2M $400K 9/0 Ohio Development but we let go 6 people this year.

Rev per employee is $115k or so. Not profitable first half of the year, 5%
7 $2.1M -$200K 19 / 10 New York Marketing EBITDA back half of the year.

SaaS Product
8 $2.2M $700K 8/0 Colorado Marketing
N/A

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 2023 2023 FTE /
Location Main Service Comments
Revenue Profit Contractors

Unfortunately, trajectory of the business is slowing from top line

Performance standpoint due to 3 market factors: reduced budgets, fewer new DTC
9 $2.2M $430K 8 /5 New York Marketing companies launching (where we do most of our work), and a shift in brands
hiring SME independent contractors vs full on agencies

10 $2.5M $700K 10 / 30 Colorado SEO N/A

Design &
11 $2.5M $600K 12 / 4 Ontario, Canada
Development
We can likely 2x profit in 2024 while keeping headcount flat

Software
12 $2.8M $200K 30 / 5 Portugal / California
Development
Our revenue and profit goals were affected by tech layoffs and "VC winter"

Design &
13 $2.8M $750K 12 / 2 BC, Canada Development
N/A

14 $3M $400K 17 / 0 California CRM Customization N/A

Web & Mobile

15 $3.5M $800K 63 / 4 New York Development
All employees are offshore

Our margins are bad right now because we gave everyone raises in the
Software
16 $3.8M $300K 26 / 0 BC, Canada Development
post-COVID frenzy, bloated our management layer, and now we're working
to fix it.

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 2023 2023 FTE /
Location Main Service Comments
Revenue Profit Contractors

We're probably heavy on employees right now but we're focused on the
work and customers and are working to move away from project work and
17 $4.5M $500K 30 /4 Washington Content Strategy
toward having all large contracts which should increase the revenue per
employee as we progress.

We hired 20 additional FTEs in Q3 & Q4 2023, so our average RPE is

currently the lowest it's ever been. We've had a lot of growth in late 2023,
18 $4.65M $1.05M 50 / 7 North Carolina SEO and we anticipate a lot of growth in 2024. So, we're temporarily sacrificing
margins for the ability to scale over the next 2 years and increase our
overall revenue per employee in 2024/2025.

19 $4.7M $2.7M 14 / 0 Arkansas Analytical Testing N/A

It's been harder to maintain the target profit margin the more people we
20 $5M $1.35M 34 / 0 Ontario, Canada SEO hire.

We dipped from 29% EBITDA to 16% this year due to investments in

21 $5M $800K 51 / 1 UK Social Media infrastructure. Staff to revenue ratio is now up at 85% when it was once 59%
but we need to do this to get to the next level of clients and revenue.

2023 was a tough year...lower top-line and lower profit as we chose to make
22 $6M $100K 16 / 15 Colorado Consulting less and keep great people.

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 2023 2023 FTE /
Location Main Service Comments
Revenue Profit Contractors

Our Gross Agency Revenue Per Employee (GARPE) for full-time employees
23 $6.5M $870K 30 / 4 California Digital Marketing is $217,614. Our margin this year is 13%, but was 20% last year. Margin
decrease was due to increasing hires.

Paid Social Media

24 $7M $2M 40 / 20 Remote Management
2024 we’ll be $10M top $3M bottom

We offer a productized service with low cost contractors and employees to

25 $11M $3.9M 10 / 66 Alberta, Canada Consulting check it

Closer to $150k on a run rate basis as we hired a bunch later in the year and
26 $11.5M $1.7M 90 / 10 Remote Consulting revenue is higher now than the calendar year implies

27 $12M $5M 80 / 0 Texas Consulting We are 30% in US, and rest overseas

28 $12.6M $885K 48 / 27 Texas Consulting Our margins are lower due to aggressive hiring

We have an exceptionally large operations team and other Operating

expenses. We in theory could outsource bookkeeping and other things to
29 $15.3M $2.3M 72 / 5 Ontario, Canada Consulting save another 250-500k/year, but employee support and success is
important to us.

30 $17M -$200K 17 / 4 - Marketing 2023 was a tough year for us.

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In Summary... OK

Here’s a summary of what we learned after analyzing

30 agencies performance in 2023:

Agencies offering consulting services generated

the most revenue.
Terrible Incredible
Profit margin dropped until agencies crossed
$10m in revenue, then it increased. The overall sentiments among agency
Agencies doing <$10m rely on offshoring to keep owners is that 2023 was tough, but they
profit margins high are hopeful for a strong 2024
Many agencies struggled in 2023 after seeing Average Revenue: $5.3m
record growth in 2022 and going on hiring sprees
*Average Team Size: 29.5
to meet the demand.
Several agency owners were impacted by macro Average Margin: 21%
factors like economic slowdown, “VC winter”, etc. Average RPE: $238K

*FTEs only 14
PS: A little bit about Hampton
Listen, I’m going to be honest with you - our private
member community is probably not for you. There
are a lot of reasons why you shouldn’t join:

It’s expensive
You’ll be challenged
It’s a time investment

And that’s OK, it’s not for everyone (we’re also very
picky about who we let in). But as we can see from
this report running a business is no cakewalk.
Sometimes, it’s nice to know that when things get
tough you have a squad of experienced founders
ready to go to battle with you.

Again, Hampton is probably not for you... but in case

you think it is, you can apply here.
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