On The Shades of Entrepreneurship podcast, I recently had the pleasure of hosting Marcel Petitpas, CEO and co-founder of Parakeeto.
Marcel shared his entrepreneurial journey and how his company is helping digital and creative agencies measure and improve their profitability. It was an insightful conversation filled with practical advice for service-based businesses.
Here's a breakdown: Insights from Marcel Petitpas on Maximizing Agency Profitability
Parakeeto: Bridging Operations and Financial Success
Parakeeto's mission is simple but powerful: helping digital and creative agencies understand the link between their operations and financial outcomes.
Too often, agencies rely solely on financial statements to gauge their success, missing out on the critical insights that operational data can provide. Marcel and his team developed tools that go beyond just numbers—they offer a framework that connects day-to-day operations to profitability metrics.
Take healthcare for example: length-of-stay (LOS) is a metric used to determine how long a patient has been admitted into a hospital, but it also affects profitability as the longer the patient remains in the hospital, the higher the operational costs, the lower the profit.
With a tool like Parakeeto, hospitals could quickly identify where LOS is impacting profitability and pivot accordingly.
The Agency Profitability Flywheel: A System for Success
One of the standout concepts Marcel discussed was Parakeeto’s Agency Profitability Flywheel. This system uses both quantitative and qualitative feedback loops to help agencies refine their processes and boost their bottom line.
Quantitative Loop: Start by documenting key assumptions about your business (expected revenue, hours worked, etc.). Measure actuals (like time spent and profitability), and then identify where reality differs from those expectations
Qualitative Loop: Data is only as good as the conversations it sparks. Agencies need to facilitate team discussions around insights from the data. Collaborative problem-solving ensures that everyone is aligned and invested in the path to profitability
By blending data analysis with team discussions, the Profitability Flywheel helps agencies get a clear picture of what’s working and what isn’t.
Pricing Models for Service-Based Businesses
One of the most actionable parts of the conversation centered around pricing strategies. Marcel shared his thoughts on finding the right pricing model, which is especially critical for service-based businesses like digital agencies.
He laid out different models based on the balance between value and risk:
Low value, low risk: Flat fees
Flat Fees: a set price for a specific service or project, regardless of the time or resources required
High value, low risk: Value-based pricing
Value-Based Pricing: Pricing based on the perceived value or impact of the service to the client, rather than the time or effort required to complete it
Low value, high risk: Hourly rates
Hourly Rates: A pricing model where the client is billed based on the number of hours worked on a project or service
High value, high risk: Abstracted time and materials (e.g., sprint-based pricing)
Sprint-Based Pricing (similar to Abstracted Time and Materials Pricing): Pricing based on time-limited work cycles or “sprints,” often used in agile development. Each sprint focuses on a specific set of tasks and is priced accordingly
Marcel also provided a rule of thumb: aim for a 70% delivery margin on agency gross income to maintain a profitable balance between cost and revenue.
Time Tracking and Compliance
While time tracking is essential, it doesn’t have to mean timesheets. Marcel advocates for more flexible methods like resource plan-based tracking.
The goal is to track time in a way that shows team members how their work directly influences decision-making within the business.
Rather than aiming for precision, Marcel emphasizes the importance of directional accuracy—enough to guide decisions without burdening the team with unnecessary precision.
Marcel's Entrepreneurial Wisdom
One of Marcel's key takeaways for entrepreneurs: “There is no business without a problem.”
Successful companies focus on solving real, pressing issues for their clients. He also introduced his Four MVPs framework for building a product or service:
Minimum Viable Problem: Clearly define the problem you’re solving
Minimum Viable Point of View: Have a unique perspective or approach
Minimum Viable Process: Simplify your business process to make it scalable
Minimum Viable Product: Offer the most stripped-down version of your solution that still adds value
This framework helps entrepreneurs hone in on what truly matters and build businesses that offer tangible solutions.
Parakeeto’s Future Vision
Looking ahead, Marcel has a big vision for Parakeeto.
They’re working on creating a "service intelligence platform" that will allow smaller agencies to clean, transform, and analyze their operational data.
The platform will include AI-assisted data cleaning and educational content to help agencies understand and act on their metrics.
Starting with creative and digital agencies, Marcel plans to expand the platform to other industries as well.
Key Resources and Next Steps
If you’re interested in learning more about agency profitability, Parakeeto offers a ton of free resources at https://parakeeto.com/toolkit/. You can also tune into the Agency Profit Podcast for more in-depth discussions on improving agency performance.
And for those looking to connect with Marcel directly, he’s available on LinkedIn for further discussions and insights.
Stream the entire conversation with Marcel Petitpas, Founder of Parakeeto, on The Shades of Entrepreneurship now!
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