The Drive for Agency Profitability

 |  By: Steve Johnson In: Agency management

Drive for profitability, swimmer

An analyst of the UK’s largest ad agencies has recommended that agencies should aim for a gross income of between £100,000 and £120,000 per head. A separate source, one in the US, suggested a similar target: $135, which is about £105.

Some of the biggest agencies are coming in much higher than that. In the latest comparison, Saatchi, Leo Burnett and Mother had the highest gross income per head, at around £160K to £170K.

Of course that’s a snapshot of the very biggest firms. The dynamics of smaller creative firms is obviously different, however the figures are nevertheless interesting.

The bigger question is: how can independent UK agencies best drive their profitability?

Synergist works closely with agencies managers every day, and about seven factors continually surface as the best ways to increase agency profitability. Think of it as a useful checklist. All are aspects that your Synergist system helps you with.

One agency told us that when you're constantly chasing elusive profits, it's like swimming underwater. You know you need to come up for air, but you don't really have the time.

1. Staff utilisation

Success is not about being busy, it’s about everybody working on the right things. Knowing your utilisation levels at all times is a crucial weapon in your armoury. Without it, you can’t be sure what percentage of all that busy work is actually chargeable.

2. Job Health

Visibility is everything. If a job starts to slip, you need to know right away before things get worse. Surprises are rarely positive ones in project management, and profitability – plus client service and team morale – are at risk.

3. Saving staff time

You would be shocked how much time agency teams spend on repetitive, administrative and unproductive work, including searching for the right information and pulling together data for reports. Such a drain.

4. Better decision-making

At every level in your agency, people are making decisions. Are they good decisions? If they are poorly informed, then no. Your teams need clear, up-to-date data to support them and make their decisions far easier to make.

5. Resource scheduling and capacity planning.

Resourcing can be a complex business. People work on multiple jobs, and deadlines keep shifting. How can you safely take on a new project if you’re not really sure what resources you’re likely to have at the various roles and skill levels?

6. Accurate estimating and quoting.

Your agency has built up a wealth of information from past jobs regarding how long things take and what the key issues were. However without a coherent and accessible system it all gets forgotten, confused and mis-remembered. With the past at your fingertips you can make a major step change in quoting and estimating.

7. New business

Your pipeline is your survival. How are you managing it? New business planning can help you track and prepare for the peaks and troughs of business.

Don't drown! Come up for air! See more about these seven profitability drivers, including insights from users about them.