Most agencies track the wrong KPIs. Are you?

Most agencies track the wrong KPIs. Are you?
Written by: Karl Sakas

If you want to grow your agency successfully, you need to make smart decisions along the way. Unfortunately, most agencies aren’t tracking key performance indicators (KPIs) beyond the basics of Revenue and Net Profit.

“[N]ot everything that can be counted counts, and not everything that counts can be counted.” –William Bruce Cameron

Good KPIs are ones that help you make better management decisions—they are actionable and forward-looking. Past revenue is easy to track, but you can’t do anything to change history, no matter how many times you reload the report.

According to our research with 750+ agencies, 9 out of 10 agencies track Revenue, but only 1 out of 3 track what I’d consider a much more actionable, forward-looking growth metric: how many leads they’ve generated.

What KPIs do you track | Most agencies track the wrong KPIs. Are you?

Today’s Leads Generated become tomorrow’s Revenue. Low lead flow means you need to improve your agency’s marketing and sales efforts, or else revenues will suffer—better to know now, when you have time to do something about it.

Other examples of actionable metrics include Employee Satisfaction and Utilization Rate.

Employee Satisfaction will impact tomorrow’s Client Satisfaction—in my experience, unhappy employees tend to create unhappy clients. As the agency’s best employees quit, client satisfaction will decline further, and things spiral downward. Yet only 1 in 6 agencies track Employee Satisfaction. When I conduct Culture Surveys at agencies, I find employees often have concerns they’re afraid to share to the owner’s face.

Today’s utilization rate predicts tomorrow’s net profit. A low Utilization Rate (below 60% agency-wide) means you’ll have trouble improving future profitability. If you can start improving your Utilization Rate now, growth in Net Profit (to 20%+) tends to follow. But only 1 in 5 agencies track Utilization Rate.

Comparing top-performing agencies with those near the bottom, top performers are twice as likely to track Client Satisfaction, Revenue per Employee, and Lead-to-Customer Ratio.

Profit Margin by KPIs | Most agencies track the wrong KPIs. Are you?

As an agency leader, your job is to make smart, above-average decisions—to help you create the life you want for yourself and your team. But if you waste time looking at non-actionable KPIs, it’ll be too late to make a change by the time you know something’s wrong. Pay attention to actionable KPIs; don’t let yourself get distracted by “vanity” metrics.

Interested in getting a full report on agency financials and pricing? This article, plus insights from other agency professionals, are all available in HubSpot’s Agency Pricing and Financials Report. I wrote the KPI commentary, and you can see even more insights in the full report.

Agency Pricing and Financials Report

Image credit: HubSpot’s 2016 Agency Pricing & Financials Report.

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