If you run a digital marketing agency, you may have found yourself staring at your bank account wondering how it's possible you could be busier than you ever were and still haven't a lot of money cell phone number list to show for it. This is something I've seen time and time again in my work as an agency profitability consultant and SaaS CEO, focused on helping agencies cell phone number list improve their profitability.
The cell phone number list truth is, nearly every agency I've worked with hit that first critical growth ceiling when they figured out how cell phone number list to attract clients, but still struggled to manage their cash flow and profitability. In this article, I'll walk you through the key performance indicators that I've used to not only lead clients cell phone number list to improved profitability, but also to show their progress and refine their strategy along the way. For each metric, I'll explain what it is, why it matters, and how cell phone number list to measure it; then provide benchmarks to help you identify what your agency should be aiming for.
Profitability Metric : Utilization Rate
If you have an in-house team providing work to clients, utilization will be the cell phone number list first and most fundamental metric to start paying attention to in terms of profitability.
What is utilization rate?
For employees who interact with customers, their working time can be divided into billable and non-billable hours. Billable hours are those spent cell phone number list on customer projects or working directly with their customers, while non-billable hours are those not directly spent with the customer, such as internal projects and meetings. Utilization is defined as the percentage of your employees' total billable time . This means that cell phone number list to increase your agency's profitability, you must ensure that your team has enough work cell phone number list to do so that clients maintain a threshold of billable hours.
Why is utilization rate important?
Understanding your utilization rate helps you avoid situations where you pay the team a salary, but earn no income in return. If the cell phone number list team isn't busy, there's no point in optimizing profitability, because the increased efficiency can't be transferred cell phone number list to other revenue-generating opportunities.
If you rely primarily on contractors or outsourced partners cell phone number list to work for clients, you may not have to worry about usage as much because you're not paying those contractors when the cell phone number list agency doesn't. is not busy. Your contribution/gross margins may be lower, but if you haven't figured out how to acquire customers in a predictable way yet, keeping your workforce more elastic might be a good idea until you sort out your funnel and your acquisition channels.