Digital Agency profitability showing dangerous trend

According to Kingston Smiths report into the financial health of the UK Marketing Industry, operating profits within digital agencies are falling fast. Across the agencies they surveyed, operating profit per head had fallen over 50% from £8K to less than £4K in just the 12 months to June 2010. One of the main contributing factors is that the agencies headcounts had increased 12% in this time. Obviously this trend can’t be allowed to continue and digital agencies need to find a way of improving their margins.

In our discussions with prospects we’ve found the most common requirements amongst digital agencies is the need to really tighten up on the tracking of over servicing of clients and jobs, as well as the % of their peoples time being spent on non-chargeable work. In addition, better forecasting of new business along with expected spend per existing client will also allow improved decision making regarding recruitment vs use of freelances to fill skills/capacity gaps.

If you are a digital agency experiencing these issues, please get in touch. We would be delighted to explain how we have worked with other digital agencies to develop proven solutions to these problems and given them back the visibility and control they need to run complex digital projects profitably.