Agencies

How Many Clients is Too Many? The Ideal Client Number Agencies Should Have to Optimize Their Profit Margins

Wondering how many clients should you have to optimize your profit margins? Databox surveyed 45 agencies to identify the sweet spot.

Avatar Davor Štefanović on December 12, 2022 (last modified on December 5, 2022) • 12 minute read

How many clients can you handle? How many is too many? Where should you draw the line? Should you draw it?

“Never turn down a client” used to be a maxim in the marketing (and not just marketing) industry. Taking on as much work as you can and stretching yourself to the breaking point was often taken as a point of pride. But was it really effective? Do people even know how much they can really handle?

More can be better but it’s easy to get overwhelmed by the sheer volume of tasks if you’re taking on too many clients. If people working too many accounts get burned out, then they won’t be serving anyone effectively and you stand a chance of losing business in the long run.

Expanding one’s business can be a good solution here, but this, too, needs to be done carefully. Throwing bodies at a problem can backfire if you don’t have robust enough infrastructure to handle the larger number of people. This requires experienced team leads and managers, as well as top-notch processes that will help you organize workflows. 

There are many factors at play and sometimes it may simply be safer, easier, and better for your business to turn down some clients.

We talked to numerous professionals in order to try and determine the “ideal” number of clients for marketing agencies.

Let’s dive into what we learned.

What Agencies Did We Survey?

We surveyed a total of 45 agencies during our research. There were 14 agencies with 10 employees, 10 with 11–20 employees, 14 with 21–50 employees, and the smallest group of 7 agencies that employed 50 or more people. 

survey respondents profile

We have the following:

  • Micro agencies (up to 10 employees), mostly have up to 20 clients on retainers and up to 10 clients they take per project.
  • Small agencies (between 11 and 50 employees) have between 11 and 40 clients on retainers. But, most of them also have up to 10 clients they take per project.
  • The number of agencies with over 50 employees is not big enough to draw any specific conclusions.
average number of clients agencies have

Our research shows that agencies prefer to have clients on retainers and try to keep the number of projects they take on in addition to that limited. 

Does Client Size Matter to Agencies?

The answer is a resounding yes. A majority of agencies we interviewed said they’re tiering clients by size.

do agencies tier clients by size

When it comes to strategy, a quarter of agencies said their client strategy is “A well thought out mix of large (over $25k per month), medium ($10–25k per month) and small-sized clients (less than $10k per month).” Slightly less than a quarter focus on pure quantity and accept any number of clients of all sizes.

what an average client strategy looks like in 2023?

Do Agencies Decline Clients and Why?

The answer may surprise you! But given the info above, it really shouldn’t.

The answer is, again, a solid yes.

Almost 60% of our respondents said they had declined a client at least once.

The most frequently cited reasons are tied to goals, unrealistic client expectations, and available agency resources.

do agencies decline clients

It’s clear that times have changed. Agencies are taking better care when it comes to choosing who they’ll work with and they’re no longer accepting every client that knocks on their door. Before deciding whether to work with a new client, they analyze their budgets, their aspirations, their own capacity, and many other factors.

“We turn down clients all the time. The main reason we turn them down is because we want to partner with winners, and if we don’t believe they have a viable path to making content into a growth channel, it’s not worth it for us to work on it. It’s like sailing without wind. There are tons of reasons we don’t think they’ll make it, but the biggest one is a lack of pragmatism regarding goals, competition and budget.”

Alex Birkett

Alex Birkett

Founder at Alexbirkett.com

Isaac Mashman of Mashman Ventures believes agencies should only accept as many clients as they can ethically handle. “By the term ‘ethically handle’ I am referring to the ability to provide what services they promised as well as the desired outcomes. If an agency is able to scale by taking on more clients, then, by all means, do so, but ensure its deliverables.”

The issue of ethics and aligned goals is echoed by other professionals. Jonathan Aufray of Growth Hackers Agency says his agency declines clients because they know they can’t deliver value for them. “For instance, if our experience doesn’t match their needs, it’s better to let them go. Another reason is a cultural fit. In our agency, we value mutual respect, and sometimes clients don’t see you as a partner but rather as an agency to squeeze the life out of its employees.”

Futurety Digital’s Sam Underwood doesn’t think only about the cold business side. It’s also important to take a look at the client’s goals and values and see if they align with the agency’s.

“We disqualify some clients based on goal, and if we can tell their goals aren’t realistic. We also periodically walk away from clients that don’t share our values; we strive to work with clients that view themselves as part of a larger whole, and if we can tell a client isn’t willing to be an equal partner in our success, we may not take them on as a client.”

Sam Underwood

Sam Underwood

Vice President, Strategy at Futurety Digital

Some companies simply prefer to work with established clients and grow the relationship rather than continually adding new ones. John Reinesch of Exponential Growth says the company has found the 10–20 range to be the best middle ground. “It allows us to set a great experience for clients and help drive their business forward. This allows us to keep the quality of our service high and focus on getting our existing clients results rather than focusing all of our effort on lead gen and sales,” Reinesch concludes.

Related: 9 Ways Agency Reporting Can Help Create Transparency with Clients and Boost Client Retention

What Is the Ideal Number of Clients an Agency Should Have?

The number depends heavily on the company size, experience, and focus. It also depends on client size, requirements, and vision. A large client that requires a lot of work can be significantly more demanding than several smaller clients with simpler requirements.

The largest percentage of our respondents (36.59%) say the ideal number to optimize profitability is between 11 and 20, while a quarter says the ideal number of clients is between 21 and 50.

It appears that the general trend is towards more clients, with just over 7% of professionals we talked to saying the ideal number is up to 10.

ideal number of clients an agency should have

Agencies That Prefer Up to 10 Clients

Agencies preferring few clients are usually small themselves or they’re medium-sized and want to emphasize worker well-being. Alternatively, they prefer servicing a few large clients and offering as large of a suite of services as they can.

Alan Carr of Webpop Design puts the focus on the balance between the number of clients and the employee workload. In Carr’s view, a large team of workers overservicing a small number of clients is just as bad as having many clients without enough employees to share the workload. “We do not believe in over-crunching culture and over-taxing our employees, as such, we prefer to pick no more than 10 clients as that allows our developers to work effectively and efficiently with each one without burning out.”

Agencies That Prefer 11–20 Clients

This is the largest section of our respondents. Over a third of them prefer working with 11–20 clients. The workload isn’t too large and most small and mid-sized agencies can handle it without too much trouble if their processes are organized well. 

Andy Golpys of MadeByShape is adamant that an agency should have between 11 and 20 clients. “You will undoubtedly experience customer concentration issues if you have fewer than ten active clients. Additionally, if there are more than 25 active clients, you run into a client dilution issue.”

“More clients does not mean more revenue. We have to be able to make sure that we are not wasting our manpower and efforts. The more clients we have that are spread over different categories, then the more problem could arise. A digital marketing agency is all about results. If they are not happy, it is not uncommon for refunds to occur. I’d say you have to find the sweet spot of how many clients you need to accept and what services they are getting. It is hard to have tons of clients needing variety of services and strategies, unless, of course you have the budget to spend.”

Timothy Clarke

Timothy Clarke

Senior Reputation Manager and Director of Sales at SEOBlog

Kaizenzo’s Andrew Tsionas agrees with taking the cautious approach. More business is indeed good but agencies need to ensure they’re actually capable of delivering on their promises to their clients. “For a smaller agency, this would mean taking on higher overhead which may be less feasible. There should always be a balance that works out for your particular situation,” Tsionas concludes.

Related: 5 Ways to Calculate Profitability for Your Agency Clients and Projects

Agencies That Prefer 21–50 Clients

Now we enter the realm of serious tradeoffs. Agencies need to balance their client base in order to ensure both revenue stability and the sustainability of their own operations.

In the words of Andre Oentoro of Breadnbeyond, “Having too few clients can lead to feast-or-famine cycles while having too many can be overwhelming and lead to burnout.”

Benjamin Dankiw of NAV43 believes that agencies should avoid both relying on a few select large clients and too many small clients. The former is too risky, while the latter can demand a high operational infrastructure that expands internal costs. Instead, he suggests focusing on a per-employee/group revenue model and staying within the 20–30 client range in order to maximize profitability. This approach is meant to reduce the need for multi-tier management and larger operational costs.

If you thought that only medium and large agencies could handle these workloads, think again.

Natasha Rei of Explainerd cited an Agency Management Institute study that says something quite different:

“Twenty is the median number for small agency profitability, according to an Agency Management Institute study. The report found that agencies earning less than $20 million in revenue are the most profitable when they have between 20 and 49 clients. There are a number of reasons why this sweet spot exists, but it likely has to do with the fact that small agencies need to be lean and nimble to compete with larger agencies. They can’t afford to have too many clients and risk becoming bogged down in projects, or too few clients and miss out on opportunities.”

Natasha Rei

Natasha Rei

Digital Marketing Manager at Explainerd

Related: How to Deal with Difficult Clients: Strategies Shared by 10 Agencies

Agencies That Prefer 50+ Clients

These are the big leagues, agencies serving over 50 clients need to have their operational infrastructure dialed in and sufficient staff capacity to handle all of their clients.

Maggie Simmons of Max Effect Marketing argues that there’s no ideal number of clients for an agency. “The more clients you have, it means you are growing in terms of work. When you grow, it automatically increases the expectations of the clients. If you have 10 clients, you’ll be able to manage them all with one person at a time. But if there are 100 clients, you’ll need 100 people—one for each client—to manage them all well.”

Of course, that doesn’t mean that all agencies with a large number of clients are in danger of crumbling at any moment. It merely means that they need more people doing more work to provide the required services.

One way to handle large client volumes is to systematize your processes. Carsten Pleiser of Design Buffs takes exactly that approach. “Design Buffs is a productised service or, let’s say a systemised agency. We tend to have a clear scope of work, no contracts, and no custom proposals”

Streamlining Agency Reporting Processes with Databox 

So agencies are definitely more picky when it comes to the clients they take on, and they try to ensure not only that they’re capable of handling them resource-wise, but that they’re making the right ethical choice by accepting them. They care about the clients’ goals and how they treat their employees as well. With that in mind, it’s no surprise they turn down clients when they’re either overbooked with the existing workload or when the clients just aren’t a good fit. The days of desperation when agencies were scrambling to get as many clients as possible and were afraid to turn down work seem to be over.

As to the answer to the question “What’s the ideal number of clients” is often ‘it depends.’ There’s no one-size-fits-all answer, and you’ll need to dig into your data in order to see how well you’re performing with your current workload and how well you could be performing with your current employee base.

One way to do that is by benchmarking your KPIs against other similarly-sized companies in your niche and seeing how you’re stacking up.

Databox’s Benchmark Groups is an excellent tool that allows you to compare your company’s performance against groups of similar companies. 

You can define your own metrics, view existing groups, or make your own, allowing you to really understand how your competition is doing and what (if anything) you could be doing differently.

To top it all off, benchmarks look great in reports, both as a way to showcase your success, and as a way to point out areas that need improvement.

If that sounds like something you could use, just sign up for Benchmark Groups and let us help you grow your business. 

If you just want to streamline your agency reporting processes (useful if you’re dealing with demanding workloads due to a large number of clients), Databox has got you covered.

With Databox, you can integrate any data source and use any of the prebuilt templates (or build your own) to create simple-to-understand and eye-catching reports featuring KPIs that you want to showcase. 

Databox is all about making data easy to access and understand.

Are you ready to streamline your reporting?

It takes only a few clicks to get started. Sign up for free and test out all of our reporting features without any commitments. 

About the author
Avatar
Davor Štefanović Davor is an English literature graduate and an avid reader with a passion for languages. Working as a translator, editor, and writer has allowed him to learn about a wide range of topics — making him something of a jack-of-all-trades when it comes to content. In his spare time, he reads, plays video games and boardgames, and runs/plays tabletop RPGs.

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