You did not decide to to open a digital agency to spend your days and nights stuck in spreadsheets and trying to figure out where your profits are going. Yet if you don’t put in place a system to help you understand this un-exciting side of your business, your financials - then you are putting yourself on a rocky path for the future.
Weather you are just starting out or have been established for many years, there are four core numbers you have to know well and review regularly.
1. Utilisation Rate
How many hours it takes your employees to produce content and services that gets results for your clients.
2. Your Packages
Weather you promote your services with pricing on your website, or not, your sales and services team need to have a price list of the services that you offer, the approximate time it takes to deliver them and how much they cost you.
Read more: Which areas of digital agency financials should you be focusing on?
3. Your Agency Costs
Typical professional service businesses can spend up to two thirds of their costs on your staff. Now this might sound like a lot to you but if you think of what you are providing to your clients, the results that you get for them with their digital marketing is reliant on providing a consistent service.
In a timely manner, provide strategic advice when things don’t go to plan and recommendations for what they need to do in the future. This type of work needs to be provided by experts in their field. On the flip side the more value you provide to your clients, the more you can charge for your services.
The number to focus is the profit you can make. Make sure you are charging according to the lifetime value of a customer, and not what you think they can pay for your services in your mind.
After your wage bill you need to know all the costs you have monthly/quarterly and yearly, including subscriptions for software and outgoings like office rent etc.
Get all these costs in a spreadsheet by month ideally in a google document you can share with your accountant so you can review together.
4. Your Pricing
In order to set pricing in your agency you need to have a clear handle on the following:
- What is it that you sell?
- Client consulting and customer knowledge.
- What’s it worth?
- Are the prices Cost based or value based?
This was a simple overview to get you started. We have also created a guide to help you further along the way. Download it right now:
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