The 10 Numbers Every Agency CEO Has To Know

Most Finance Directors like a good list. Here is one every Agency CEO should be interested in.

  1. Client utilisation. How busy are your staff and how much of their time is spent working on client business is a vital piece of information in a business which charges for time.
  2. Recovery rate. Mathematically it’s the ratio of what you have charged against what you should have charged for the time spent. Commercially it shows whether you’re over servicing. Why that is and what you can do about it is the game in a nutshell.
  3. Revenue per head. Spending time making sure you have an accurate headcount (including freelancers) means you can rely on the revenue per head calculation. This figure, more than any other, shows the success of your agency. How much new business you win, how accurately you estimate and how efficiently you deliver are all rolled up into this figure.
  4. Compensation to revenue. The accountant’s favourite with good reason as it determines how profitable you are. Less than 50% and you’re doing exceptionally well. Between 50% and 60% pat yourself on the back. Between 60% and 70% you should be ok unless you’ve got fancy, expensive offices. Over 70% your net margin is getting squeezed into single digits and you should start to worry. Above 80% and you should be looking urgently at your commercial model.
  5. New business pipeline. It is the life blood of the Agency so what is the pipeline potentially worth? Look at the weighted value of the opportunity (the closer to signing the contract the greater the weighting) as well as the total value. This is of enormous value once you start looking at the next few months.
  6. Pitch Conversion rate. Knowing how successful you are at pitching should, at the very least, start a conversation about pitch approach from pre-qualifying leads through to the level of innovation in the agency.
  7. Biggest (5) client (s) %. It’s no coincidence that the Agency profit target of 20% is also the ideal limit to your single biggest client. The bigger your client and the lower your margin the more disruptive and damaging would be the fallout from losing that client.
  8. Working Capital. Often overlooked but making sure you have a buffer of 3 months’ worth of running costs in working capital means you will have a more secure financial platform. It means your first worry isn’t likely to be about cash so more energy can be spent managing and improving your business.
  9. Staff Churn. Your people are your most valuable asset so you should be measuring how many are leaving and why. Some change is good, too much and your corporate knowledge and intellectual property is walking out of the door.
  10. Year on year comparisons. Rolling 12 month comparisons of revenue and profitability are a really good way of making sure of the overall growth (or otherwise) trends behind your business. It takes out the ups and downs of a specific month.
2 replies
  1. Ed
    Ed says:

    Is there an argument that Profit Per Person is a better indicator of agency success than Revenue Per Person?

    • Simon Collard
      Simon Collard says:

      Ultimately I’d have to agree with you, it’s all about profit. The reason, and its marginal, why I prefer revenue per head is that it’s more useful in looking at the operational and commercial model ie how much are we charging for our services as well as taking salaries and overheads out of the recruiting decision. Otherwise there may be a bias to the cheaper option which may not be the right one. Overall I like profit per head but in decision making and operational improvements I’ll stick with revenue per head.

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