What is your Agency’s most important KPI?

The business world is not short of key performance indicators. I have books with hundreds of them in to measure every part of every business. In the Agency world we probably have more than our fair share.

However this blog isn’t about a list of useful KPIs and how to use them. It’s about a realisation I had when talking to a couple of Agency heads recently that usually there is one KPI that resonates; one which affects the performance of the Agency in a direct and profound way. This KPI either has a clear connection to the profit margin or can touch every aspect of how the business operates. Focussing on and managing this single KPI can provide a long term path to sustained profitability.

Sounds fine in theory but what how does that apply in real life? Well, this will depend on the nature of your agency (and the strength of your management team).

If you have a high volume, low(er) margin business then you need to monitor your compensation to revenue ratio very carefully; set your team a strict budget based on accurate short term forecasts.

If, however, you have a low volume, high margin project based Agency (and yes, there are still a few around) then I would make sure you manage your pipeline very carefully.It’s easy to get caught up in delivery of a large, profitable project and forget to look for the next one.

More likely you fit somewhere in between these two extremes. In this case the one KPI that might be most useful is revenue per head. Now I’ll admit this is a slight cheat as there are a lot of operational and commercial factors which go into this particular KPI. How accurately you estimate a project, how efficiently you deliver and how well you manage client’s expectations and demands will all affect your revenue per head.

Whether you’re an Agency FD failing to get traction with your numbers or a CEO looking for an effective way of using numbers to galvanise your business it’s worth thinking about the one KPI that resonates most and how it can improve your Agency’s profitability and it’s long term value.

If you’d like my help to improve the long term performance of your Agency please contact me for an initial chat about your business.

How measuring operating performance can improve the value of your agency

Many things affect the value of an agency. So many, in fact, that it can appear daunting when there are so many day to day issues to deal with.

Taking time to understand the underlying issues that drive long term growth is vital if all your hard work is going to be properly reflected in the value of your business.

Once those drivers have been identified you can build a long term strategy around how you measure, manage and improve these core operational issues. This won’t guarantee long term success but it will hugely improve the odds.

These drivers will vary from agency to agency but they will always cover the fundamentals; clients, revenue, new business, people, proposition, growth and financials. Each of these areas is vital to long term success and each should be measured and managed to bring year on year improvements.

Making sure you are working within a sensible long term plan will help you deal with the ups and downs of business reassured by the knowledge the decisions you are making every day are going in the right long term direction.

In order to bring the strategy to life, to make it live and breathe, it needs to be measured and it needs to be accessible. The best way to make this a pleasure rather than a chore is a well designed, simple and robust dashboard that tracks the performance of your chosen key metrics.

Over and above being very good at what they do most successful Agencies will have these strong fundamentals. To maximise the value of your agency you need strong management as well as strong leadership; a logic to underpin the magic.

I’ve been a Finance or Commercial Director in the Marketing Services sector for nearly 20 years. During that time I have seen a lot of change and worked on strategies to cope with hard times as well as make the most of the good. One of the things I’ve learnt is that aligning strategy and reporting to a common goal is vital to success.

There is no silver bullet to improved performance. Only by making marginal improvements across the board will you make a significant difference to the value of your agency.

If you’d like my help to improve the long term performance of your Agency please contact me for an initial chat about your business.