Building value
Improving revenue quality in a project led agency
Project led agencies are told that buyers want recurring revenue, and most of their revenue arrives one project at a time. This guide is for founders in experiential, events, creative, production, sport and culture who want to improve the quality of project revenue on its own terms.
In short: Revenue quality is predictability, retention, spread, margin and cash, and project revenue can score well on all five without a retainer in sight. The work is to know which clients come back and why, to convert repeat behaviour into programmes and frameworks where clients will agree to them, to separate contracted work from expected work and from hope, to price and scope so that margin survives delivery, and to collect cash through deposits and milestones. Three hypothetical portfolios below show how differently the same revenue can read, and what moves each one.
What revenue quality means when every project is a new decision
In a project led agency a client who has bought from you for six years still makes a new purchasing decision each time. There is nothing to apologise for in that. It is the model, and it can be evidenced. The five tests buyers and founders apply are the same as for any agency, read through a project lens.
- Visibility. How much of next year’s revenue is contracted, how much is expected from clients with a track record and a known budget, and how much is unqualified pipeline. The three should never be added together.
- Retention and repeat behaviour. Which clients came back, how often, for how long and with what growth; and which left, and why.
- Concentration. The share of gross profit from the top client and the top five, and how it has moved.
- Margin. Project profitability after all direct costs, including the freelancers and the overruns, by client and by project type.
- Cash. How quickly revenue becomes cash: deposits, milestones, debtor days and the cost of carrying supplier payments ahead of client receipts.
A retainer is not automatically stronger than this. A retainer with a short notice period, a thin margin and a client who has gone quiet is weaker than an annual programme the client has run with you for four years and budgets for each autumn. Buyers who know the sector look at the evidence behind the contract type.
How to assess your own portfolio
Repeat behaviour. Build a client by year matrix of gross profit for the last four years. Mark each client as annual programme, regular repeat, occasional or one-off. The matrix shows retention, growth and churn more clearly than any ratio.
Programmes, frameworks and procurement. Note which clients run annual programmes or calendars, which have you on a framework or roster, and which buy through procurement with rate cards and tenders. A framework does not guarantee revenue; it does mean the client has already decided you are eligible, which shortens every subsequent decision.
Client budgets and forward visibility. For each repeat client, record what you know of next year’s budget and the point in the year it is confirmed. Visibility in this sector is often a question of calendar: the autumn conversations that set spring programmes.
Cancellation and postponement. What your terms say, what you have recovered when events moved, and what costs you carried.
Margin by project. Compare quoted margin with delivered margin. The gap is where scope creep, overruns and unbilled changes live.
Cash. Deposits as a share of project value, billing milestones against delivery milestones, debtor days, and the months in which supplier payments run ahead of receipts.
Three hypothetical portfolios
Three agencies, each with £3 million of net revenue, assessed on the five tests. The figures are invented to show how differently the same top line can read.
| Test | Portfolio A: programme led | Portfolio B: repeat but repitched | Portfolio C: retainer heavy, thin |
|---|---|---|---|
| Mix | 60% annual programmes with five clients on frameworks; 25% regular repeat clients; 15% new | 70% from clients who bought last year, each project competitively pitched; 30% new | 65% monthly retainers on 30 day notice; 35% projects |
| Visibility | Strong: programmes budgeted each autumn; about half of next year contracted by January | Weak: each project is a new decision; little contracted beyond three months | Nominal: retainers roll monthly, but any client can leave within a month |
| Retention | Average client tenure six years; two programme losses in five years | Half the clients have returned three years running, but win rate per pitch is 55% | Three retainers lost in two years; the rest have been held for four years or more |
| Concentration | Top client 30% of gross profit; top five 75% | Top client 15%; top five 45% | Top client 40%; top five 80% |
| Margin | Delivered gross margin 28%; quoted 32% | Delivered 22%; quoted 30%, eroded by pitch cost and overruns | Retainers 15%; projects 30%; blended 20% |
| Cash | 30% deposits; milestones through delivery; debtor days 35 | Billed on completion; debtor days 75; suppliers paid before receipt | Retainers billed monthly in advance; debtor days 25 |
| How a buyer reads it | High quality project revenue with a concentration question | A sales engine with a margin and cash problem | Predictable looking revenue with a weak core and a dependency |
Portfolio A has the evidence: programmes, frameworks, tenure, deposits. The weakness is that the top client is 30 per cent of gross profit, and the evidence to gather is that client’s contract, its history and who owns the relationship. The action is to win one or two more programme clients; shrinking the largest would destroy value.
Portfolio B has loyal clients and no structure around them. The evidence to gather is the client by year matrix, which will show the repeat behaviour the pitch process hides. The actions are to convert the most reliable repeat clients to annual programmes or frameworks, to price pitch cost into project margins or stop pitching for work that is really a reorder, to fix scopes and change control so that quoted margin survives delivery, and to introduce deposits and milestones.
Portfolio C looks predictable and is not. The retainers are thin, one client is 40 per cent of gross profit and the notice period is a month. The evidence to gather is retainer profitability by client and the real tenure of each. The actions are to reprice or rescope the thin retainers at renewal, to grow the project work that carries the margin, and to reduce dependence on the largest client by winning others, with the contract reviewed for notice and change of control.
Practical improvements
- Pricing and scopes. Price from a delivered margin target instead of a quoted one; scope in writing; charge for changes. Track quoted against delivered margin on every project.
- Programmes. Offer repeat clients an annual programme with a planning calendar and a rate card, which converts a series of decisions into one.
- Frameworks and rosters. Get onto them where clients use them; they shorten decisions and raise retention.
- Deposits and milestones. Match billing to the cost curve: a deposit on commission, stage payments ahead of supplier commitments, the balance on delivery.
- Cancellation terms. Clear and enforced, with recovery of committed costs.
- Project profitability. Review it monthly, by project and by client, with the overruns explained.
- Client development. Plan growth inside existing clients, which is cheaper than new logos and improves the retention evidence.
- Record the evidence. Tenure, repeat rates, win rates, deposits and debtor days, kept monthly, so that the story is already written when it is needed.
Motion’s view
The project led agencies that read best to buyers are not the ones that have forced clients onto retainers. They are the ones that can show, client by client, that the work comes back, that it is priced to a margin that survives delivery, and that the cash arrives before the suppliers are paid.
What to do next
Build the client by year matrix and the quoted against delivered margin comparison; between them they show where the quality is and where it leaks. For how this evidence is used in a transaction, see preparing your agency for sale and due diligence. We work on this with founders through strategic advisory, in four week sprints.
Want a view of your revenue quality?
A confidential conversation with a founding partner about what the portfolio shows and what would move it. Speak to us.
Written by Rick Palmer and Rob Reid, founding partners of Motion Advisory Partners. General guidance, not advice on any specific business or transaction. Legal and tax points vary by jurisdiction and should be checked with appropriate advisors.