We’re all guilty to a greater or lesser extent of working in silos. This can certainly be true about how finance departments operate but it’s also true about agencies as a whole.
One very simple way to bridge this gap is by knowing how other agencies are performing and how you compare to your peers across the 3 key per head metrics (revenue; staff costs and profit). We’ll look at Revenue Per Head (RPH) in this blog. We’ll go to look at Staff Costs and Profit in parts 2 & 3.
Using data from the very useful annual Kingston Smith survey of the financial performance of marketing services this can be done relatively easily. In fact I’ve made it easier than that – I’ve prepared some helpful charts. I’ll then explain what actions you could take off the back of seeing how your commercial model compares. Now here’s the data by sector
If you’ve beaten your sector average, congratulations, you’re commercial and operational model is better than most. It’s still a good idea that you keep, or start, checking the client utilisation levels of your team and the profitability of your clients to ensure the 3 deadly sins of under-estimating, over-servicing and scope creep don’t pull you back. If you’re below the average this becomes more urgent.
A good way of sense checking how you are doing is based on this 4 quadrant model.
We’d all like to be to the right of the RPH target. How busy you need to be to achieve that will depend on your ability to charge a premium price as well as how effectively you manage the 3 deadly sins.
To the left of the RPH average and the problem becomes more pressing. If your team is under utilised and your RPH is low you need to investigate whether you’re overstaffed. Check the forecast and the pipeline but if revenue isn’t going to take an upturn soon you may have to take action.
Being busy with a low RPH means you’ve got a bad combination of the 3 deadly sins going on. Check your estimating procedures (who is raising them? Is anyone checking them?): how your team are monitoring progress and if your clients are always asking for free stuff.
This may mean some difficult conversations but at you’ll be doing it based on some data from outside of your own silo.