There are many, many ways to approach the goal of improving agency profits.
Ultimately though it boils down to 2 things; either you increase your revenue or reduce your costs.
This is a statement of the obvious. How you go about either (or both) is the challenge. I’ll explain how I go about it a little later but first a word about the most important number in Agency finances.
The best indicator for Agency profitability is the ratio between total staff compensation and revenue. The compensation to revenue ratio (CTR) determines whether you are profitable or not.
This stands to reason. People costs are the single biggest agency cost. And your people produce the work that your clients want and are paying for.
If you can improve the decision making, in advance, around your revenue and staff costs then you will improve profits.
This sounds deceptively simple. It’s not. Revenue is constantly changing. Project timings change. Pitches are won or lost. Freelancers are used or not. Each revenue or cost decision is binary but the sheer number of them makes it complicated to keep accurate track.
If, like most people, you use a spreadsheet to manage your revenue and costs then you know how quickly they either break, become obsolete or become way too complicated.
Faced with so many bits of information about timing of projects, pitch progress and freelance resource needs the spreadsheet is not fit for purpose.
Something new is needed. It needs to be robust so that everyone can use it at the same time without breaking it. It needs to be flexible to reflect the constantly changing landscape of project and pitches. It needs to be quick so that by the time you’ve looked at 1 scenario it’s not out of date.
This is where AgencyMAP.io comes in. Agency professionals are currently building AgencyMAP.io. It is a tool which looks after your revenue forecast, keeps a track of your pipeline and deals with multiple scenario quickly. It keeps you focused on the profit effect of your decisions.
AgencyMAP.io will give you back control of your agency forecast. Interested? Sign up at Agencymap.io. I’ll throw in a copy of my ebook “Where Is The Money? A Guide To Agency Finances”.