How KPIs Can Help Your Creative Agency Thrive
Read time: 23 minutes
The creative industry is a fast-paced, ever-evolving realm, and every day brings fresh challenges and opportunities. Competition in the crowded creative agency space is fierce. New startups are entering the market daily, so there’s no room for complacency. As an agency owner, you get caught up with numerous tasks. You juggle lots of competing priorities every day. It doesn’t even matter whether you’re an advertising agency, marketing agency, digital marketing agency, or creative strategist. From managing your clients to leading your team, creating your agency’s strategy and growth, and winning new businesses, it’s a big task. You can easily get caught up in your day-to-day activities and lose sight of the bigger picture.
As we all know, the continued onset of technology and its ease of use has moved the needle in many creative agencies. Significant efficiencies can now be achieved by having a centralized cloud-based single system to capture those estimates, jobs, timesheets, and invoices that were likely held in disparate systems previously. So, job well done for everyone who has taken that step! However, it doesn’t end there as with everything captured into a single database, we can start to explore some of the intelligence that is contained in the data.
As a creative agency owner or professional, you know that success in this world requires a delicate balance of artistry, strategy, and efficiency. Understanding how your agency’s efforts are performing is the key to growth, and tracking KPIs is a way to identify what you’re doing well and shed light on areas that need improvement.
In our guide, we dive deep into the world of creative agency KPIs. We demystify the data-driven strategies that can take your agency to new heights and help you understand what KPIs your creative team should monitor.
Key Performance Indicators, often shortened as KPIs, are the quantifiable metrics that help you measure the overall health and progress of your creative agency. They provide you with concise and actionable insights into how well you’re meeting your goals and objectives. The overall concept behind KPIs is to track and measure your progress, and they could focus on core elements of your progress, which is why they are called the “key.”
“In every line of business there’s some kind of metric that someone uses to gauge how they’re performing and whether to judge success or failure,” says Jing Suk, an adjunct professor at Rutgers Business School. There should be the vital navigation instruments used by managers and owners to understand whether they are on course or not. The correct set of KPI’s will help shine a light on performance at individual, team and overall business level.
KPIs can vary from project to project depending on its goals.
Imagine, as the Owner of a creative agency, being able to look throughout the day at your business performance related to billable hours, or the Traffic Manager being able to look at staff utilization.
On another hand, your KPI could be ROI or the number of sales generated in a PPC campaign that aims to generate sales for a new product. Or, your KPI could be the number of engagements or shares on an Instagram campaign that aims to build your brand awareness.
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KPIs are the silent workhorses of your creative agency. They keep your projects on track, your clients satisfied, and your teams firing on all cylinders.
KPIs provide data-backed insights into your agency’s performance. With KPIs, you’re not going on your gut feelings, instead, you’re making informed choices that lead to better outcomes because they are based on data.
Implementing KPIs can work for creative agencies of all sizes and provide benefits such as:
Creative agency KPIs track and quantify the progress of projects, teams, and the business’s overall health. They can help you by indicating whether the agency is moving in the right direction and achieving its goals. Without KPIs, it’ll be difficult to tell whether your actions are actually making the right progress or not. Therefore, monitoring your KPIs provides you with invaluable insight into potential problems early. So, you can easily capitalize on opportunities to grow your business.
By focusing on specific KPIs, creative agencies can pinpoint areas of success and those that require improvement. For example, high client satisfaction KPIs indicate project success, while low project profitability KPIs signal a need to take on different clients.
KPIs align your team and resources with your agency’s goals. When you monitor KPIs you ensure everyone works in unison towards common objectives and every effort contributes to achieving that goal. This could be increasing profitability, boosting client satisfaction, or improving project delivery timelines.
There are 5 types of KPIs, so when you’re drafting, make sure to have at least 1-2 that fall under each category.
- Outcome KPIs: These KPIs focus on the results and are often associated with the overarching objectives of your agency. Providing a bird’s-eye view of your agency’s overall success.
- Performance KPIs: Performance KPIs offer insights into the efficiency of your agency’s daily operations. These metrics assess how well particular tasks are being executed on a team and individual level. For example, utilization tracks the hours an agency employee works on a project vs. their total hours according to their regular schedule.
- Leading KPIs: Leading KPIs are your North Star indicators that help predict future performance. They provide signals about potential challenges or opportunities.
- Customer KPIs: Customer KPIs track customer acquisition cost, conversion rate, churn, and upsell rates.
- Financial KPIs: Financial KPIs look at cash flow and profitability, and project KPIs look at project cost and time vs. quoted estimates.
Creative agency KPIs guide you through your decision-making in content strategy, project management, resource allocation, and more. According to Google, 95% of leading marketers agree that “to truly matter, marketing analytics KPIs must be tied to broader business goals.” So the ones you choose to monitor and give importance to can directly impact your bottom line and the success of your business.
In truth, you can track hundreds of KPIs, but what’s important to one agency might not be appropriate for the next one. Focusing on metrics that align with your business goals will allow you to gauge whether growth is occurring or falling short in the areas that mean most to you. The right KPIs will answer specific questions about the agency’s performance and inform the way forward.
It’s all too easy to become overwhelmed by following too many KPIs and so being selective about the ones that you consider important to the success of your business is crucial. A good KPI will give you that high-level view of performance. Those KPIs can also be tied to the successful attainment of larger business goals.
Having access to such data, presented in an efficient and user-friendly manner, can dramatically assist in the decision-making process on every level.
At Function Point, we have recently introduced a number of KPIs that can enable creative intelligence. They are customizable and available through the dashboard. There is also a neat summary of “job health” on the job details display. As a starting point for when you map your own KPI’s we’ve listed some examples below, but for a more comprehensive overview, check out 15 Important KPIs to Measure.
ROI is the cornerstone of financial evaluation for your creative agency. If you’re not making a profit, then your agency is in trouble. This is probably why, according to Statista, 88% of marketing professionals monitor revenue as their top KPI.
It’s a metric that not only measures profitability but also helps you make informed decisions about resource allocation and strategy.
Calculating ROI can sometimes get complicated as some outcomes are hard to assign a monetary value to as they are not tangible (like brand awareness).
To calculate ROI, you’ll want to look at your broader financial picture.
Start by calculating the total cost of the investment (this could be a creative project, a marketing campaign, or any business initiative).
Costs can include things like software subscriptions, staff wages, materials for a campaign and more.
Next, subtract this number from the revenue generated by that specific investment.
Next, divide this result by the cost of the investment.
Finally, multiply the answer by 100 to express it as a percentage.
Suppose your Communications and PR agency invests $10,000 in a content marketing campaign, and the campaign generates $30,000 in revenue. Calculating the ROI would look like: (30,000 – 10,000) / 10,000 * 100 = 200%. This means for every dollar invested, you gain a 200% return.
Now, why does ROI matter?
For creative agencies, the bread and butter is, of course, creative projects. It’s all about ensuring that your projects and campaigns are not just creatively impressive but financially sound. In this case, ROI reflects the project profitability, or the financial return of your agency’s creative endeavours. It evaluates whether the time and resources invested align with the revenue the project generated.
An ROI greater than 100% means you’re getting more out of your investment than you put in. But you don’t want to only make a small profit or break even so you want to keep an eye on your ROI as it is a clear indicator of a successful venture.
One of the most important KPIs for any agency is tracking your client satisfaction and loyalty. And it is even the most relevant KPI that answers the question of how clients are happy with your services and likely to recommend you to others.
Why is client satisfaction important? Measuring how satisfied your clients are is a strategic advantage in building lasting relationships and sustainable growth. High satisfaction is a driver of client retention, referrals, and the overall reputation of your agency. Satisfied clients tend to stay loyal, engage in repeat business, and recommend your services to others, creating a virtuous cycle of growth. Keeping your current clients rather than constantly sourcing new ones is much more cost-effective!
To measure client satisfaction effectively, agencies can use various methods, such as surveys, feedback forms, or the Net Promoter Score (NPS).
For example, after completing a branding project, you send out a client satisfaction survey. They rate their experience as 9 out of 10, citing strong communication, creativity, and timely delivery as the highlights. This helps you understand where your strengths are in your agency.
Another method is using the Net Promoter Score (NPS). It looks at whether or not your clients are willing to go above and beyond to express their love for your agency and if they are able to recommend you, putting their reputation on the line.
With the Net Promoter Score, you simply ask clients one question: “On a scale of 0-10, how likely are you to recommend our agency to a friend or colleague?” Based on their response, you can group your clients into:
- Promoters (9-10 score) – Loyal enthusiasts who will refer others.
- Passives (7-8 score) – Satisfied but could easily leave for competitors.
- Detractors (0-6 score) – Unhappy clients who can damage your brand.
To calculate your overall NPS, subtract the % of detractors from the % of promoters. You will get an NPS value of above 50, and that’s excellent. So, you can pat yourself on the back.
The NPS tells you how happy your clients are and if they’re loyal advocates for your agency. When you track and measure it as an important KPI over time, you can see if satisfaction improves or declines with the changes you make. And because referrals are so valuable for creative agencies, promoters are clients you would like to treasure and retain.
Make client satisfaction a priority by monitoring your NPS regularly. You can gather feedback on how you can improve your Net Promoter Score. Over time, the aim is to maintain or improve this score consistently. When you track client satisfaction with precision, you’re not just ensuring a happy clientele; you’re cultivating a thriving agency that benefits from long-term client relationships. Remember, your goal should be promoters who rave about your agency to everyone they know!
Revenue is the lifeblood of any agency. So, the top-line revenue your agency generates each month and year is also a clearly vital KPI to track for your creative agency. It provides a holistic view of your agency’s financial health and trajectory. Look and monitor both the total revenues earned as well as the percentage growth over time.
Monthly recurring revenue is also a helpful metric. This is the income from ongoing client contracts. So, it gives you a baseline to forecast against.
When examining your revenue growth:
- Set specific revenue goals annually and break them down by quarter. Then, you can measure the gradual progress towards hitting your targets.
- Observe your growth by service line. Is demand increasing or decreasing for certain offerings?
- Factor in seasonality. This is where you examine certain months/quarters that your growth may routinely be slower.
- Review your growth by the client. Are key accounts expanding spend?
Monitoring revenue growth helps you predict cash flow, budget appropriately, and invest where needed to hit your business goals. If you see declines or a plateau, you should know that’s a red flag that requires some actions to correct.
Therefore, aim for steady and healthy revenue growth of 10-25% annually. By setting revenue growth targets, you align your team’s efforts and measure the success of your agency’s growth strategies. This shows your agency’s services are in demand, and clients see value in your work. When your revenue grows, it means your agency can too.
4. Actual Project Time vs. Estimated Time
Accurate time estimates are vital as they will inform how you book future work. Underestimating project time puts you behind the proverbial eight-ball and may delay or otherwise impact the quality of other projects.
To calculate this KPI, take the forecasted hours divided by actual hours and multiply that number by 100—the closer to 100 you are, the better. Delays happen for myriad reasons, and sometimes they cannot be helped. However, if estimates continually fall short of the time you actually spend, growth will be elusive.
Actual Project Cost vs. Estimated Cost
The calculation for this KPI is identical to the project time equation noted above:
((Estimated Project Cost ÷ Actual Project Cost)*100) = your answer
The greater the variance between what you quoted your customer and what the project cost you to complete, the less profit you can expect. You may feel that your projects are executed well, but you won’t know for sure if you’re not tracking this KPI. The greater the margin, the more money you’re leaving on the table.
If you find this to be the case, you’ll need to dig deeper. Understanding some of the more nuanced KPIs may reveal more specific aspects of your workflow, leading to higher costs. Software, skills, experience, communication, and service level agreements can all be factors, as can be simply not pricing your services adequately for the work being done.
5. Lead Time
Knowing your lead time is critical as it enables you to plan and staff accordingly and manage client expectations. Failure to do so may result in overbooking or pushing your staff over capacity, and continuing to do so will reduce team morale and could cause some to quit or start looking for work elsewhere.
Think of it as a busy 100-seat restaurant with only two servers. They may be very good at what they do, but service will suffer if you give them too many tables. It’s not their fault; more so, it’s management’s failure to recognize their staff is overwhelmed. It would be unlikely that those valuable employees would last in that job as they would not feel valued. Customer service and brand image would also suffer, negating any benefit of having a full restaurant.
Once you have mastered time and cost estimates, estimating your lead time should be easy enough, allowing for better workflow consistency and output quality.
6. Gross Profit Margin
Estimating gross profit margin is a fairly straightforward task. The resulting number is essential to projections, planning, and agency growth.
The agency may, for example, have good revenue, plenty of work in the pipeline, and enough to keep everyone busy. However, if costs outweigh the revenue, the agency is operating at a loss, and it’s just a matter of time before a crisis is declared.
To improve gross profit margins, agencies must reduce costs wherever possible. Here are a few ideas:
- Deploy technology to automate repetitive functions
- Streamline communication with project management tools and CRM
- Track team and project costs individually to reveal areas of concern
- Anticipate issues during the estimate phase and cushion time and budget accordingly
- Audit supplier and vendor contracts to ensure the services you are paying for are still viable. For example, third-party SaaS you no longer use can unnecessarily inflate your costs.
In a nutshell, the billable utilization rate is used to measure the percentage of time your team spends doing client’s work that you can bill for, as opposed to non-billable tasks. This metric is a critical KPI that helps you gauge the efficiency of your team members or whether or not your agency is billing the right amount to cover overhead costs, enabling you to optimize time allocation and maximize billable work.
To calculate your billable utilization rate, you take the total billable hours for a set period and divide it by the total hours worked. For example, if your team logged 8,000 billable hours in a month, and the total hours worked was 10,000, your utilization rate is 80% (8000/10000).
Aim for a billable utilization rate between 75-85%. Here’s why this metric matters:
- Higher utilization means greater productivity and more billable income. But you shouldn’t overwork your team!
- If the rate drops below 70-75%, look at why. Are you overstaffed, or are people spending too much time on non-billable work?
- Low utilization can signal poor resource planning. Make sure staff levels match workload, and projects don’t stall.
- Striking the right balance is key. Burned-out teams produce worse work and have higher turnover.
As a creative agency, you should constantly monitor your billable utilization rates weekly or monthly. With real-time access to billable hours data, you can track daily productivity, identify bottlenecks, and make data-driven decisions about what type of clients and projects you take on. If it dips, take action to adjust capacity or reassign your resources. Keeping your team actively billing throughout the year will positively impact on your revenue.
A related metric is staff utilization. It measures how effectively your creative talent is engaged in projects. High staff utilization indicates efficient resource allocation, while low utilization may suggest underused or burnt out staff.
In the creative agency world, landing new business is important. But you also want to focus on generating repeat business from existing clients. This KPI measures what percentage of your revenue comes from current clients versus new ones.
To calculate it, divide revenue from existing clients over the past year by your total revenue. For example, if $1M of your $2M revenue came from existing clients, your repeat business rate is 50%.
Aim for a repeat business rate of at least 40-50%, if not higher. Here’s why this metric is so valuable:
- Repeat business means clients are satisfied and see value in your services. It’s much easier to upsell existing clients than attract new ones.
- Loyal clients that return year after year provide more predictable revenue streams. This results in steadier cash flow.
- It’s cheaper to retain an existing client than acquire a new one. You already have a relationship built.
- Long-tenured clients often refer new business through word-of-mouth.
To boost your frequency of repeat businesses, you must focus on delighting your current clients. Check-in frequently, provide VIP perks, and give them discounts for loyalty. The goal is to morph them into raving fans who will come back again and again.
Cost per lead (CPL) is a fundamental KPI for marketing agencies. It gauges the efficiency of your marketing campaigns by measuring the cost required to generate a single lead.
Why is CPL important? It helps you allocate your budget strategically. A low CPL suggests that you’re acquiring leads at a cost-effective rate, while a high CPL might indicate areas for improvement.
Suppose you run an email marketing campaign with a total cost of $1,000, and it generates 10 leads. To calculate the CPL, it’s a simple division: $1,000 / 10 leads = $100 per lead. This means that, on average, you’re spending $100 to acquire each potential customer’s contact information.
If you have a high Client Lifetime Value, then this could be considered a good CPL. However, if your clients typically come for small one-time projects such as a logo design, this could be too high.
Aim to lower your cost per lead over time. Here are some tips:
- Experiment with different marketing channels and compare costs per lead for each. Double down on the most effective ones.
- Look for ways to improve conversion rates from prospects to leads through better call-to-actions and lead magnets.
- Create nurturing campaigns to convert more leads to customers. Review costs at each stage.
- Segment leads to focus sales efforts on the hottest prospects first.
- Analyze what campaign sources and content produce the highest quality leads.
Driving down your cost per lead results in a better marketing ROI. And the lower this cost, the more you can scale advertising and expand your reach.
CPL empowers you to compare the performance of various marketing strategies. Regularly calculating the cost per lead for your creative agency lets you make smart marketing decisions and get the most bang for your buck. For instance, if a social media campaign has a CPL of $50 and an email campaign has a CPL of $100, you can make informed decisions about where to allocate more of your marketing budget to maximize lead generation.
Similar to cost per lead, customer acquisition cost (CAC) reveals the cost of acquiring a new customer and can indicate your marketing efforts’ effectiveness (or otherwise). KPIs in this area will tell you which channels produce your best leads so you can focus your effort and budget on what’s driving results. The higher your CAC, the lower your profit. Ultimately, you want to shorten the conversion timeline, and removing any friction in the customer journey is critical to this end.
Reducing CAC reduces wasted time and spending and improves ROI, putting money back into your budget while ensuring your pipeline stays full.
Ways to reduce CAC include:
- Improve landing pages and optimize content to attract high-quality organic traffic.
- Use ideal buyer personas to hone marketing messages more specifically to the target audience.
- Eliminate unnecessary costs, such as advertising on channels that do not deliver results.
Choosing the right creative team KPIs is a necessary process that can significantly impact your agency’s growth. To quickly define KPIs tailored to your agency’s objectives, follow these steps:
1. Map your goals: Identify your agency’s North Star goals. What do you want to achieve in the short term (in the next quarter) and long-term (next year)?
2. Involve your team: Engage your stakeholders when choosing KPIs, including managers and team leads. Their insights and perspectives can help identify the important areas to measure on a team level.
3. Get the nitty gritty: KPIs should be measurable and relevant to your agency’s operations. Vague metrics can lead to clarity and interpretation. Consider a goal you measure, like “rate of projects delivered on time.”
4. Define achievable targets: No one likes targets they feel are out of reach, so set clear, achievable targets for each KPI. This step establishes benchmarks for success and motivates your team. Targets also serve as a basis for evaluating performance against your agency’s goals.
5. Leverage technology:
Utilize software solutions to automate KPI tracking and reporting for accurate and real-time performance insights. Function Point’s all-in-one agency management software has empowers 500+ creative agencies, helping them to optimize workflows and operations while facilitating data-driven decision-making for a thriving team, satisfied clients, and agency growth.
Successful implementation of advertising agency KPIs begins with clear objectives aligned with your goals. Make sure to always involve your team, select the most relevant KPIs, and invest in the right tools to track and monitor them efficiently. Establish baseline measurements, communicate the significance of creative KPIs to your team, and set realistic targets. Regularly monitor and analyze data, fostering accountability amongst your team.
Remember that your KPIs are not static, just like your business; they require continuous improvement and regular reviews. It’s just as important to celebrate achievements and learn from setbacks to ensure your whole agency is on board.
Tracking KPIs provides the insights you need to guide your agency’s growth and success. But, analyzing all these data can be time-consuming without the right tools. That’s where Function Point comes in.
Function Point is an all-in-one agency management software designed specifically for creative agencies like yours. Since 1997, over 500 creative agencies have used Function Point to not only track KPIs but optimize their entire business.
With Function Point, you get complete visibility into agency workflows, projects, operations, and financial performance through integrated dashboards and reporting. No more wasting time digging through spreadsheets for insights!
Function Point puts the data and analytics you need to make smart decisions right at your fingertips. You can quickly see how your agency is performing across key metrics like the 5 KPIs we covered today.
So don’t just track your KPIs – use those insights to drive growth! Learn more about how Function Point gives creative agencies the tools to thrive at www.functionpoint.com. Sign up for a custom demo to see how Function Point can help you monitor performance, spot trends and opportunities, and scale your agency to new height
Success isn’t just about creative brilliance. It’s about data-driven excellence. Running a thriving creative agency requires that you keep a close eye on key metrics that impact growth and success. By regularly tracking and analyzing the KPIs above, you can spot potential problems early and capitalize on new opportunities for your creative agency.
Remember, you can’t improve what you don’t measure. So, start tracking these 10 KPIs today to help your creative agency prosper for the long haul. The success and longevity of your business depend on keeping a pulse on your performance. Let these metrics guide you toward growth and prosperity!
At Function Point, we’re always keen to learn how we can improve. If you have thoughts as to the types of KPIs that you’d like to see then please let us know and we’ll consider them for inclusion in future releases.
Ready to take your creative agency to new heights? Start implementing these KPIs today and watch your agency thrive. Get in touch with us to learn how our software can help you monitor your marketing data.