Meeting agency margin expectations
After reviewing agency valuations, June to October 2022, it is highly probable it will be another challenging year. Retaining staff whilst facing pressures to increase salaries, worker shortages and the recent economic turmoil is affecting the outlook for the next 12 months. Growth targets are being downgraded, apart from a few specialised agency areas, the future new business pipeline has fallen in value by 28% and lower agency’s margins compared to the previous quarter. In this deteriorating climate, should agencies be focussing more on margin?
Profit is, of course the primary objective for any Agency, but not every agency owner will openly say so. Without profit, no agency has a long-term future. There are some exceptions in the industry, but valuing any agency business is heavily influenced by profit and margin. Those agencies that are safeguarding margins and increasing profits are tracking time on campaigns, tasks and activities, ensuring they’re minimising non-billable time. Furthermore, time management help prioritise tasks and support the agency to improve pricing and more accurate budgeting. Monitoring people, time and resources is key to budget planning, which in turn provide insights on billable and non-billable time, and Client profitability. There are a few other areas influencing profitability, which we will talk about in our end of year report but as we highlighted in our intro, we cannot stress the importance of retaining your highly talented team is critical in the current climate.
Now more than ever, creative businesses cannot afford to waste time, effort, and people. For the sector to succeed, all work operations need to be optimised, new business time reduced and rework eradicated. Much of this is well known, but we thought we would simply remind you