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How to measure your creative agency's performance

Published on Wednesday, 4th January 2017, contributed by FD Works

How to measure your creative agency's performance

Jonathan Gaunt FD Works 

When you’re at the helm of a busy creative business, it’s very easy to get sucked into the day-to-day running of the agency. You’ve got deadlines to meet, clients to keep happy – and very little time to actually focus on the evolution of the agency as a business.

But if you’re going to improve your profits, maintain a happy team and grow the agency, it’s vital that you put time aside to look at the underlying performance of the company. Are you being as efficient as you could be? Are you spending too much on overheads? Could you be more profitable with your top clients?

That’s why performance management, and key performance indicators (KPIs), are so central for high-flying creative agencies.

Real-time numbers: a more regular kind of performance reporting

As we pointed out in our last blog, the starting point of good agency management is having real control over your key agency numbers. And, for our money, Xero online accounting software is the best choice of business software for creative agencies.

Xero’s ‘killer’ cloud benefit is the speed at which you can pull down your key performance numbers. By putting Xero at the centre of your business systems, you get completely current, real-time data. So the figures you see re your sales, your spending or your payroll costs are all 100% up to date, and 100% on the button.

If you’re used to old-school desktop accounting software (mentioning no names, Sage), having a real-time view of your KPIs can be a genuine revelation.

  • No waiting until month-end to see your metrics – they’re there, 24/7 whenever you want to take a look.

  • You can code and track every transaction in the agency, giving you a huge pool of business information to feed your reporting.

  • You have built-in reports that are there at the click of a button, and a front-end dashboard that shows you the exact health of the business, as it stands right now.

Finding the KPIs that matter to you

With performance management, the initial step is to do some head-scratching and to pin down the key performance indicators (KPIs) that are really going to matter for your particular agency.

It’s not just about how much cash is in the bank, after all. It’s just as important to measure things like your debt ratio, your current cash-flow situation or the average number of new projects you’re bringing in each month.

The KPIs that are important for you will be unique to your business and your particular creative specialism. But a few key things to think about are:

  • Cash flow – knowing the liquidity of your cash situation is vital. How much income is coming in this month, and how much are you going to spend in costs: is and that income going to cover these costs?

  • Outstanding client invoices – if you don’t get paid, your cash flow is going to look pretty dire. Do you know how much is owed to you in outstanding invoices? When you do, you can chase your debtors, get the invoice paid and boost your cash.

  • Gross profit ratio – this metric is a vital part of measuring your financial health. You divide your gross profit by your revenues to get a clear indication of how profitable you are. Anything between 15-20% is great; anything below 10% needs some work.

  • Customer satisfaction – it’s not all about financial numbers, as we’ve said. Carrying out client feedback at the end of a project, and tracking this over time, is a great metric of whether you’re delivering effectively for your clients.

  • Team engagement – equally, you also need to track and measure how your team feel about the work they’re doing. A happy team is a productive team, so you need to spot any dips quickly and act fast to improve engagement.

Improving your agency with a trusted business adviser

The absolutely vital thing to understand about KPIs and performance management is this:

Once you have these metrics, you must ACT on them!

We really can’t re-iterate this enough. There’s no point running a business performance report in Xero, and then not doing anything to improve the agency’s performance. When you look at your business performance data, you need to analyse the information and spot the high and low points. And when you see a metric that needs some work, it’s crucial that you put a plan in place to improve that number.

This is where having a trusted business adviser on your team REALLY helps. At FD Works, we’ve had plenty of clients come to us from incumbent firms where their accountant just wasn’t doing anything to help them interpret and improve on their KPIs.

Helping our creative business clients to understand their numbers, get a handle on their KPIs and do something proactive to improve them is central to what we do. It’s what our agency clients love about us: that we’re not content to just hand over the numbers. We’re always 100% involved in helping you build a more successful business.

Talk to us about improving your agency’s performance

At FD Works, measuring your current and future performance is part and parcel of our approach to business advice.

We combine our own bespoke software reporting and forecasting tools with a genuinely personal, hands-on kind of service. We get to know you, your business and your agency’s goals – and then we help you choose the KPIs and metrics that tell the true story of the business.

If you’re looking to improve your creative agency’s performance, give us a buzz and let’s talk about how setting up the right KPIs for your future success.

Drop us an email to info@fd-works.co.uk or give us a call on 01454 300 999.