As your agency grows, it’s all too easy to lose track of profit. At Wow, we know what it takes to make money in an agency. Here are our top tips to make profit a habit:
1. Have a plan for making profit. Produce a forecast for the next six months that shows all revenues and costs. How much money would you like to make? What would you need to do to achieve this?
2. Set targets and measure progress against them each month. Where are you winning? What do you need to tighten up on?
3. Calculate your billing capacity. This is the total amount you could bill if all your resource was fully utilised. To do this, take each person's day rate and times it by 21 working days in the month. If some team members only do chargeable work for a percentage of the time, factor that in. Don't forget to include regular freelancers in this equation too. Now, once you've calculated this figure, take a look at your revenue for the past six months and see how far short you were. Get curious about why the gap exists - where is the profit disappearing to in your agency?
4. It's likely that much of that lost profit will be due to inefficiencies in the way you run projects. Start tracking profit by client, by project, and by department. Share the stats with the people who can affect the results and encourage them to seek out ways of doing things more efficiently. Weekly profitability meetings are a great way of doing this.
We've got plenty more tips for agency owners. We regularly share them with a small group of agency owners through a highly bespoke and personalised program, designed to dramatically increase the profit you make. Find out more.