The term KPI sounds like a bit of a buzz word doesn’t it? Often when you hear buzz words you feel that they are fads which come with bravo and hype and then fade away into nothingness a few months later.
Well, KPI’s are not fads or buzzwords. KPI stands for “Key Performance Indicators” and is are the most important numbers and data that you should be tracking to ensure that your agency is on the road to success.
As an owner of a digital agency you need to ensure you are monitoring the 4 KPI’s below to help develop your business and ensure continued growth. The market for digital agencies is getting ever more competitive, with pressure in regards to scope creep and also staff cost so now is the time to start digging deeper into those numbers.
These KPI’s which we will cover below are super important because they may highlight areas of the business which need more investment, or give you a heads up about future profit and cash flow problems. These aren’t numbers for the sake of numbers but numbers in which you can use to develop plans and strategies to make your agency, stronger, bigger and more profitable.
Employee satisfaction
Your employee’s are the cornerstone of your agency, they drive the creativity and potential of your agency. With more and more agencies competing for the top staff you need to ensure you are looking after your employees better than ever before.
Satisfaction of your employees is a metric which can be measured. We recommend putting together a quick survey and getting your staff to complete this bi-annually or even quarterly.
That way if you notice things taking a downward trend you can put measures in place to prevent this before your staff start leaving you.
Client satisfaction
So, you are now keeping your employees happy but your business would be nowhere without your clients.
You need to ensure that the quality of your work is consistently high and that your clients are happy about the way they are being managed.
Again this can be measured with a questionnaire sent out to clients at the end of each job. The feedback from this is key to improving your agency and competitiveness.
EBITDA
EBITDA stands for earnings before interest, tax depreciation and amortisation and is measuring how profitable your agency is as a percentage of its sales.
Ideally digital agencies should be between 18-23% EBITDA. This is a key area to focus on because frequently your clients are asking you to do more and more work without an increase in the fee and this will have a negative impact on the EBITDA.
In order to survive and thrive your agency needs to maximise its EBITDA.
Staffing costs
The single biggest cost in your agency is staff. We all know it’s becoming more difficult to recruit and retain top quality staff so to combat this many agencies are offering more and more staff perks. These may be higher salaries, gym subscriptions, posh coffee, and fun team days out.
This all costs money and eats into your profits. So keep an eye on your total staff costs. As a general rule for digital agencies this should be below 55% of your turnover.
So there you have it
So now you know the key KPI’s for your agency it’s time to put in place an action plan for how to track and measure them!
Did you know, we now offer a virtual finance director package? – We put together your management accounts each month and report back to you with loads of fancy graphs on how your business is performing.
So if you want to know how to put these KPI’s into place, get in touch and we will walk you through what steps you need to get them working for your agency.