AGI (Agency Gross Income)

Agency Gross Income (AGI) is the standard measure of an agency's real revenue. It takes your total billings and subtracts all pass-through costs — the money that just flows through your agency on its way to vendors, media buys, freelancers, printing, or other third-party costs that you're essentially fronting on behalf of your clients.

If your agency bills $2 million in a year but $600,000 of that is pass-through media spend, printing costs, and stock photography licenses, your AGI is $1.4 million. That $1.4 million is what you actually have to pay your team, cover your office lease, fund your tools and software, and generate profit.

AGI matters because total revenue can be wildly misleading in the agency world. A media-heavy agency might bill $10 million but have an AGI of only $3 million because 70% of their revenue is pass-through ad spend. A strategy consultancy might bill $3 million with an AGI of $2.8 million because almost all of their revenue is labor. Both are "$3 million agencies" in terms of what they actually run on, even though their top-line numbers look completely different.

AGI is the number that actually matters when you're benchmarking your agency's performance — revenue per employee, profit margins, overhead ratios, and compensation benchmarks all use AGI as the baseline, not total revenue. If you're comparing your numbers to industry benchmarks and using total revenue instead of AGI, you're comparing apples to oranges.

It's also the number acquirers and investors look at. When someone values an agency, they apply a multiple to AGI (or EBITDA derived from AGI), not total revenue. Pass-through revenue doesn't create enterprise value because it doesn't reflect your agency's actual capabilities or margin structure.