From struggle to strength: KPIs that transform agency performance
Discover the key metrics you need to track to take your agency to the next level
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This is the nitty gritty of where the profits are made, the details and devilswork that determine whether your agency is profitable or not.
While we cannot always predict the economy, nor can we predict clients’ (sometimes whimsical) decisions, the difference between making money and not can often come down to these major KPIs.
Feeling the pinch? Only 17% of agencies expect to hit the ideal gross margin of 51%-75% this year, leaving most at risk of missing the minimum 50% benchmark. If your margins aren't where they should be, it’s a big wake-up call. It’s time to revamp your financial strategies and push beyond the industry average to secure a stronger bottom line.
Business is always a moving target. But even then, only 16% of agencies achieve between 51%-75% billable utilization rate, leaving a lot of room to hit the 60% benchmark, which is crucial for maximizing resources and profitability.
With 41% of agencies hitting their targets less than once a week and 19% less than once a month, it's clear that boosting this metric is crucial for unlocking better efficiency and higher profits.
How to avoid unprofitable client workA guide to mastering utilization rates with Marcel Petitpas
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If you’re one of the 72% of agencies overspending on overheads, you’re likely burning through cash and jeopardizing stability.
With only 28% managing to stay within the 26%-50% range, and a benchmark of 20-30%, it’s crucial to build up at least three months' worth of overhead costs in reserves. This safety net will keep your agency steady during financial hiccups.
A whopping 68% of agencies struggle with scoping accuracy, often ending up with budget overruns. With only 32% hitting the 26-50% accuracy range versus the 20% benchmark, it’s time to sharpen your scoping game to keep your projects on track and your profits intact.
Half of agencies aren’t profitable week-to-week, and 19% only make a profit monthly.
Solution: Align your rates—£116.15-£154.87 in the UK and $200-$249 in the US—to boost profitability. Improve your pitch game; 34% of agencies win clients monthly or less, with 11% winning less than twice a year.
More clients doesn’t necessarily mean more money.
Why? Because if your team is not capable of taking on a given number of clients, they could wind up becoming overloaded - leading to low quality work and unhappy clients. That’s when you start to see churn rates go up and your margins shrinking.
Agencies, particularly those looking to scale, are better off focusing on profitability metrics like the ones outlined in this chapter if they want to understand (and predict) future growth.
