Agency Financial Management Second Wind Seminar – Key Takeaways
Read time: 4 minutes
Last September, Karen O’Mahony and I attended the Second Wind Agency Financial Management seminar in Chicago. It was a fantastic learning and networking opportunity to meet with agency owners, CFOs and key decision-makers. Tony Mikes did an excellent job of explaining in detail how to increase margins, markups, and cash flow in your ad agency.
My blog today is for those of you who haven’t had the opportunity to attend his seminar and would like to review one of the important key takeaways related to estimates that was discussed during the two-day workshop. Of course, you can read blogs and absorb some of the knowledge that was spread during the event, but the real experience of asking questions directly related to your agency reality is only possible by being there and interacting with your industry peers.
I could spend hours writing about the agency financial management seminar, however, the idea is to present you with a few points regarding how to properly estimate a job so you can implement the learning in your agency. Below, there is a list of crucial items that need special attention if you want to increase your agency’s success.
Keep estimates profitable! Make sure you tell your client this is just an estimate and prices may vary along the way. The key here is to give a ballpark figure and adjust accordingly – remember that clients rarely forget a ballpark estimate, which makes it hard to increase the price later.
Do you have samples of previous estimates categorized by job type? This information becomes handy when putting together an estimate for your client. I’ve seen many agencies struggling when they need this info especially when they don’t have an agency management software in place to easily store previous estimates.
Imagine having a quick and easy way to search for all the website development types of estimates and identify the profitability of each one before sending an estimate to your client. Does that sound right? If you are still storing all your estimates in Excel in different folders and files, it may be the time to implement an agency software in your firm.
When an estimate involves external expenses or outside buys, make sure to apply a markup of about 30%. Yes, in reality it may be easy to apply a 30% markup, but as we know, clients often try to negotiate a final price. The key with external expenses is to negotiate with vendors and get competitive rates. Try to get two to three quotes for every major expense and negotiate the payment terms as well. As Tony Mikes says: “Sell middle, buy low.”
Another important point is to show a detailed description on the estimate, but not the breakdown item by item. You don’t want to open up so your client will see every line item on the estimate. Doing so, will open up for questions and complaints about different components of the estimate. You can state that this is the agency policy.
A great way to benchmark estimate prices with other agencies is to take a look at the Second Wind Annual Agency Survey where you can compare your estimate prices by job type with other agencies in the industry.
How do you track estimate changes? Do you have a way to track historical information and compare different estimate revisions? I am not sure if you have experienced that in the past, but many agencies start losing money after these revisions. What I would suggest is to let your client know in writing ahead of time that any change request will impact the final price. Doing so will avoid any confusion and misunderstanding between agencies and their clients.
To recap, creating an estimate for every single job is fundamental to keep your agency profitability and ensure you are charging the right price to your clients.
Stay tuned for more blogs about the Second Wind seminars and don’t forget to share your thoughts with us!
Leonardo Maia | fp. Director of Sales