Why Most Agencies Misunderstand Profit | EP27
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Why Most Agencies Misunderstand Profit | EP27
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Most agency founders think they understand profit. Many are looking at the wrong numbers.
Today, we break down gross margin, gross profit, and EBITDA and explain what healthy agency financials actually look like. We show why gross margin is the true funding source of your business and how low gross margin quietly limits growth.
We also unpack:
Why 50 percent plus gross margin should be the starting target
What a healthy sales and marketing allocation looks like
Why 35 percent EBITDA can actually be a warning sign
The common myth of "we invested in growth"
If you want more freedom, better capital allocation decisions, and a stronger long-term agency, start by getting gross margin right.
Key takeaways today:
📌 Gross margin is the funding source for growth and experimentation.
📌 50 percent plus gross margin creates flexibility and strategic optionality.
📌 Healthy agencies target 20 to 30 percent EBITDA.
📌 High EBITDA can signal underinvestment in growth.
📌 Revenue growth without margin discipline leads to long-term erosion.
📌 Sales and marketing must be measured over longer time horizons.
📺 Watch us on YouTube
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Peter Kang on LinkedIn: https://www.linkedin.com/in/peterkang34/
Sei-Wook Kim on LinkedIn: https://www.linkedin.com/in/seiwookkim/
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