4 KPIs to Craft a Brighter Future for Your Creative Agency
Posted on 12th April 2017 in KPIs
Written by Freya Hughes
Whether you’ve got a keen eye for design or a way with words, canvasing these creative agency KPIs will keep you on top of your finances. Creative agencies tend to rely on a few key clients, and we understand you need a contingency plan in case this goes awry. In this blog, we not only explain which KPIs are relevant to you, but we also get our own creative juices flowing to broaden your thinking about their importance.
When you’re running a creative agency, there’s a lot to keep you awake at night. Trying to keep track of staffing and materials, pitching for new business and getting existing client’s campaigns live, means it’s a wonder that you get any financial tasks completed. However, if you focus on these KPIs, you can take a massive shortcut on the energy invested.
1. Project margins
A vital part of creative services is knowing how much of your cash can be allocated for a project. With the fact that payment may not be received until after completion, this KPI will protect your business from overspending on a given task. You’ll need to also factor in materials used and how much you should invest in them.
Plan for this when you forecast so you’ll know in advance if you need to change your payment terms to immediate or upfront, as this will help you take on other projects at the same time if they present themselves to you.
2. Revenue per client
We know a handful of clients bring in a large chunk of some business’ revenue. Other clients work almost as a bonus income as these core clients are such big hitters. It’s problematic to rely on one or two clients, of course, as you never know when their need or loyalty may change. Breaking down how much revenue each existing client brings in and calculate how many clients, on average, you need to secure per month.
In a similar way, the more satisfied clients’ are then the more chance of them returning. Repeat clients are beneficial as they should take up less time than winning new clients. Measure how much your clients’ contracts are worth to give you an idea of how much cash they bring in for you per month.
In the creative world, efficiency is key. Let’s say you’re spending an average of five hours on each project. Suddenly a project comes in at double that time, so you need to work out why this has happened. It may be that this particular project had more invested in it by the client, which is great, but if you measure the ‘why’s and ‘how’s of its overrun, you’ll be able to make an informed decision as to if it was worth it for your business.
Are your staff not performing to their optimum and if not why not? Were the appropriate materials not available? Do you need new stockists? There are a load of possibilities, you just need to get to the bottom of it.
4. Profit per time period
To reiterate the above, maximising your efficiency is so important. If projects aren’t being achieved quickly and to your high standard, you need to look at how you can shave minutes and pennies off the work coming in. Look at a new way of operating: freelancers can save you money as they can be hired by the project. Can you find a cheaper material to work with that is easier to source? Little things can make a huge difference, so keeping tabs on how much cash should come in in a given time frame is a fundamental way of keeping your business healthy. See what forecasting can do here.