Running an agency is like trying to steer a roller coaster—things move fast and it’s not easy to stay in control. You can never really sit back, relax, and enjoy the ride—it might turn out disastrous.
In a dynamic environment, where there’s a lot going on at once, what’s key is to recognize what you should focus on. Thankfully, there are certain numbers you can track for a regular sanity check of your business. These are the numbers that will never lie, and will paint an accurate picture of the present and future of your agency.
Speaking of numbers, it’s easy to get lost in tons of KPIs and spreadsheets. At the end, you can’t see the forest for the trees and you might want to spend your time elsewhere—like on servicing your clients or mentoring your team. If you want to track just three metrics to see if you’re heading in the right direction, here’s what we suggest.
1. Profitability Per Client
As any other business, you’re aiming to get benefits from investing your time, talent, and knowledge into clients. Wanting to make a profit is not bad, it’s actually crucial for the health and future of your business. It’s your responsibility because today’s profit is tomorrow’s investment into your agency and its employees.
Why should you track profitability per client? You might already know your overall profit on the company level, but unless you drill it down by client, you’ll never know where that profit comes from.
*This report has been created with Productive’s new feature, Insights
History repeats itself and some clients might be draining your profits for various reasons:
- Constant revisions
- Scope changes
- They’re a new client you want to impress so you don’t bill some of the hours
If you have a foot in the door strategy, you should keep that client for a while. Otherwise, you should fire them or raise your prices because this client is costing your agency too much, and a few of those could lead your agency into bankruptcy.
Every agency should strive to become profitable and productive. Productivity is measured by the amount of billable hours you deliver. The formula is simple:
In this line of business, you earn money by billing your time to clients. That means every hour your team doesn’t bill costs you extra money.
You should track utilization per employee and per team to look for areas where you can improve.
Most non-billable time is an investment because you’re spending it on pitching new clients, mentoring your employees, or marketing your own agency. You should, however, look for ways to become more efficient and cut down on admin which is draining your profit.
When analyzing profitability on an individual level, keep in mind that new teams (e.g. the new technology team you just formed) and junior employees will have a lower utilization rate, and you should compare them differently. You can easily group your staff with custom fields to go deeper into utilization metrics.
3. Forecasted Utilization
Tracking utilization is essential for every agency. You need to know your numbers and pay close attention to billability. This is a fast-moving industry and to stay ahead of the game, you need to prepare for all scenarios. If you want to have optimum utilization, you need to be proactive.
That’s where forecasted utilization comes in. If you plan your resources in advance using resource scheduling, you can already predict how busy your team will be in the upcoming period.
What can forecasting help you with?
- Preventing burnouts—you can predict that some team members will be overbooked and react accordingly (shift project timelines, add more people to the project, hire contractors)
- Reducing bench time—you can spot who won’t have much to do ahead of time, and assign more work to them
- Aligning Sales and Operations—by having a clear picture of the availability of your resources, you can direct your sales team into selling certain services at a given time
- Planning hiring—this helps you spot which resources you’ll lack in the future so you can hire and onboard new employees on time
Ultimately, forecasting helps you in achieving the perfect scenario: where everyone has just enough work going on.
Keep Your Data in One Place and Watch Your Three Key Metrics
To sum up, you don’t need to track a zillion KPIs, but you should set up a warning system: the key metrics you’ll track to always know if your business is healthy. By keeping all your data in one place and building custom insights with visual charts, you can easily achieve that level of control with Productive.