What key business indicators matter the most for successful creative agencies?

Creative agencies have been at the forefront of the ‘big data’ revolution, with an explosion in insights to analyze and measure the success of projects big and small. That said, while most companies are strong on the client side of success – the impact their campaigns have had – that’s not always the case for internal metrics. However, these numbers are crucial for any agency to understand how they’re performing as a whole. So if you’re not sure what you should be tracking, this one’s for you: read on to find out the key business indicators for creative agencies. 

The measurement trap: when data grows into assumptions 

The measurement trap that many agencies fall into is extrapolating their company success rates solely from client-side metrics. If you ask colleagues working on a particular client how it’s going, they’ll often point to either delivery metrics (e.g. amount of work completed to X timeframe and Y budget) and campaign metrics (e.g. the leads it generated for a client). 

Both of these, however, are only starting points. When we point to delivery metrics, we’re implying that we’re being time- or money-efficient; when we point to campaign metrics, we’re implying that we’re satisfying our clients. However, do we actually know that for certain from these numbers? 

The answer is no: we only know for certain the work completed or leads generated. The rest is an assumption disguised as evidence-based fact – a measurement trap which makes a compelling case for diving further into the data. Let’s see, then, the metrics agencies should be covering, both in these areas and others. 

Your key business indicators for creative agencies 

1. Billability 

Billability, otherwise known as realization, refers to the percentage of your total possible billable time that you actually bill for. The formula for working out your billability percentage is (total billed hours) / (total billable hours) x 100. 

Imagine, for example, that you have 25% of a total working week of 40 hours given to non-billable activities (non-client work like meetings or internal admin). This gives you a billable time of 30 hours – the remaining 75% of your working week. However, perhaps because of upsell on some projects, or non-billed amendments or other factors, you actually bill 20 hours. 

In this case, we divide the 20 billed hours by the 30 billable hours. We get a result of 66.66% blah – and this is our billability percentage. This way, we have a much stronger understanding of efficiency than by measuring delivery metrics alone as above. 

If you’re wondering what constitutes a good billability percentage for a creative agency, we recommend around 65% and up. You can find out more about this and how agencies like yours stack up in our 2023 Industry Report. 

2. Profitability 

To zoom out a little from billability, our next metric is profitability. Essentially this is the measure of your agency’s profit relative to its expenses. Of course, the ultimate figure is whether your net profit is in the green, but there are some other headline KPIs within this to track, including your average billable rate and your gross margin. 

• Average billable rate: This allows you to understand the average per-hour rate your business earns. Calculate it by taking your adjusted gross income (adjusted for pass-through expenses, such as PPC spend) and dividing it by billable hours. 

• Gross margin: This allows you to understand profitability on a production basis – are you profitable on the way work is produced? Take your adjusted gross income again and subtract labor costs and goods-sold costs. 

These metrics, along with billability, help give you a greater understanding not only of your current profitability but of how you can forecast it. If you find the gross margin is extremely narrow, then it has implications for scalability as production costs could tighten it further as you ramp up, for instance. 

3. Client satisfaction 

Remember how in our initial example of the ‘measurement trap’, we assumed client satisfaction based on campaign performance? That’s a risky assumption, particularly on long-lived accounts when your client might have become used to your level of work and no longer value it as they did, or might have higher expectations. 

This is why it’s crucial for you to independently track client satisfaction as a key business indicator in your agency. Set up a measurable (i.e. numerical) scoring system divided into key areas that you can ask your clients to score on. 

CSAT (customer satisfaction) is an obvious starting point, although you may find it more helpful to include it at the end of an experience survey. Think too about including CES (customer effort scores), where you ask how easy their experience with you was. Finally, ask how likely they are to refer you to a contact – and turn this into an NPS (net promoter score). 

4. Employee satisfaction 

We’ve covered metrics for efficiency, profitability and client satisfaction, but there’s one more key part of an agency we haven’t yet measured, and that is the employees. Where would any business be without its creatives, account managers, salespeople and more? 

In a world where job-hopping is the norm, it’s so important for agencies, particularly small ones, to retain talent. 

Make sure that you survey all staff on a regular basis. Monthly will give a much stronger picture of trends than quarterly, as you’ll understand how morale changes as, for example, stressful crunch times approach and then through to the end of a quarter. 

As with client satisfaction, use a numeral scoring system. Key questions you can ask include their overall satisfaction with their job, whether they feel they have the tools and training they need to do their job well, whether they feel their achievements are recognized, and, of course, a net promoter score – would they recommend your agency to friends as a place to work? 

Use your new-found insights as a launchpad for growth.

If you’re tracking these four key business indicators, you’ll be in a strong position to truly understand how your creative agency is performing. And with that deep insight into your performance, you’ll be best positioned to understand how you can tackle your future growth. If your billability is efficient, your margins are relatively strong, clients are satisfied, and employees on-side, then growth is in your grasp. 

That said, metrics are even more powerful in context. To find out how your company compares to hundreds of other creative agencies like yours, download your copy of the 2023 Industry Report and get valuable insight into the wider market.