5 Key Metrics That Every Creative Agency Should Track
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I would like to start with a simple but harsh reality; a creative agency cannot succeed unless it carefully monitors its progress. Part of this means to keep track of revenue streams and recognize potential pitfalls early on.
This sounds simple right? Yet, it is surprising how often creative agencies choose to track certain metrics but are happy to remain in the dark about other aspects of their business.
To have a successful and healthy business there is something you need to commit to: reporting, reporting, reporting! Say it twice, thrice, a hundred times! As long as you are pulling key reports you can and will stay on top of (and more importantly, build) your business. Through reporting you will recognize your strengths and weaknesses faster, see where exactly it is that you are losing money and spot potential opportunities for growth hidden amongst the numbers.
So what metrics should you be tracking you ask? Below I’ve compiled a list of reports that I recommend you pull in your creative agency. Each agency is different so you may have more to add to this list based on your workflow/requirements. The important thing is that you commit to building time for reporting into your weekly/monthly routine.
1) Job Summary Report (Pull This Report Weekly)
The job summary should be a list of all active jobs at any given time in your agency. It should be filtered in one of two ways (I recommend doing both) – jobs by client and then jobs by Account Executive.
What you want to be looking at here are things like job estimated hours versus job actual hours/ estimated external expenses versus actual expenses/ close date of the jobs/ how many days the jobs are open etc.
2) WIP Report (At Least Monthly)
Work in progress (also called work in process). Similar to the job summary report we use this to look at active work at the agency but this time we may compare it to our invoices, in other words, how much work have we done this month but not yet billed? Tony Mikes from Second Wind recommends trying to keep these numbers down, after all cash is king! As a best practice for longer projects you should bill the client for work to date on a monthly basis. Otherwise you are accumulating time and expenses against a project but not turning these into billed agency receivables.
3) Utilization Report/Individual Hours Productivity Report (Ideally Weekly)
This is used to monitor staff productivity based on how many billable hours they are submitting weekly versus their target billable hours. This is crucial to ensure your agency is working as efficiently as possible while increasing profits. A good target for billable staff is 1600 billable hours per year according to Second Wind (based on 7 billable hours per day minus weekends, PTO and holidays).
4) Agency Gross Profit /AGI (Review Monthly)
Analyzing the agency gross profit (or AGI) report should be done on a monthly basis as a pulse check on the health of your agency. This is the true measure of the size of your agency.
5) New Business by Account Executive (At Least Monthly)
Looking at our sales pipeline will allow us to make better projections, keep us prepared for quieter months and focused on gaining new business.
Some equally important reports include:
- Outstanding invoice report
- Lost hours report (think about how you currently track hours that have been worked but will not be billed, chances are you may not be monitoring these hours)
- Tasks reports
So, my main advice? Do not underestimate the importance of taking the time to review your numbers. Assign the necessary resources to pull and analyze the data. Times are tough in the agency industry, but that being said, there is huge potential for finding growth opportunities and efficiencies that will make the ROI on reporting and analysis worthwhile.
Don’t bury your head in the sand, get informed, keep close to your data and the opportunities to increase your revenue will present themselves!
This article was contributed by former Function Point employee, Karen O’Mahony.