Benchmarking For Growth
The agency world is a chaotic space, with hard to project revenues tied to uncontrollable client finances and market forces. Yet agencies still have to be profitable and grow every year. In this post, we discuss the strategy of focusing on those elements that are in the agency's control. Improving the agency's finances and performance through benchmarking.
The concept of benchmarking is simply establishing the average time, cost, etc. it takes the agency to accomplish something. The challenge is that there are so many elements in an agency worth benchmarking that it's tough to pick the most useful ones. Locating and processing the data can be a challenge as well. Thankfully, there are solutions that handle that part for you. For instance, Advantage's AQUA Agency Management System features dashboards that provide you with the data you need at a glance - making benchmarking quite easy. And since the dashboards are easily customizable, you can track and benchmark those elements most critical to the agency.
Common Benchmark Elements
Every agency is unique, so you might want to benchmark different items, but here are a few that most agencies find useful to have benchmarks for:
- Margin Contribution by Deliverable (best way to identify what the agency does well vs what it doesn't)
- Billable % by Role (useful in determining performance metrics for individual employees)
- Revenue per Employee (helps identify under-staffed and over-staffed offices and accounts)
- Services per Client (great metric to identify organic growth opportunities)
- Average Tenure (often run for both employees and clients)
- Highest Revenue Month (for both the agency and individual accounts)
- Margin Contribution by Account (self explanatory)
The list could go on and on, but the strategy is simply to calculate the key metrics that most impact the agency's performance and then set to work improving those metrics. Forget about industry benchmarks. Focus on improving your own agency performance year over year (or even month over month) and you'll be on the road to success.
Since these benchmarks relate to agency performance, get the agency involved in improving them. Get a meeting together to show where the agency stands and talk about ways to improve each benchmark. By crowdsourcing the solutions, you'll be creating action plans straight from the individuals responsible for executing those plans. That way, they'll feel empowered and motivated to generate results.
But you can't do it without the data.
There are some things that humans do well and some that software does better. Compiling and analyzing data is definitely best left to software. It takes far too much time and is too sensitive to error when humans take it upon themselves. That time is better spent strategizing how the agency can improve the benchmarks than calculating and monitoring the benchmarks themselves.
If your agency doesn't have a management system that integrates the necessary data for you, then it's worth your time to request a free online demo of one that does. Advantage's AQUA software automates data compilation from Project Management, Media and Accounting that both establishes benchmarks for you and enables you to easily monitor how you're performing against them. That same automation makes audits a breeze and helps improve the agency's cash flow with automated invoicing and many other features worth discussing. Your benchmark is the system you have today. Your best strategy might be finding a better one.