Agency dashboards – Business metrics to track – and why

Unsurprisingly, many people leading creative businesses come from a creative background.

The assumption is that our creative strengths – and education – mean we’re not very strong commercially.

There’s probably some truth to that. When I first ran my business, I felt horribly under-prepared.

Sure, you can lean on colleagues and advisers, but if you’re leading an agency or consultancy, you need an understanding of the commercial levers that control your business.

A tool I used over the years running my company and others is the monthly dashboard: a set of clearly illustrated business metrics, usually reviewed in a monthly leadership or board meeting, with bigger reviews quarterly and annually.

Here’s some practical advice from a creative-turned-commercial guy who learned on the job. I’m sure it’s not comprehensive – and I’d love to hear what others have learned – but hopefully you’ll find it useful. Here goes…

Choose your metrics carefully

When you start listing the things you want to monitor, it’s easy for the list to grow rapidly. My advice is to keep it as short as possible.

If you have too many metrics, you’ll likely do a poor job of recording them accurately. More importantly, you’re less likely to act upon them.

I’ve found it helps to cluster the key metrics into three categories:

• Business development

• People

• Finance

They’re deliberately in that order. It can be easy to demote business development and people issues in favour of focusing on the financial numbers.

Let’s look at the metrics for each area, one at a time.

Business development metrics

In my experience, the most critical thing is to make sure business development is actually happening – especially when you’re busy delivering work. You might measure the activities that lead to proposals, but I like to cut to the chase:

1. Proposals sent

Count these in two ways each month:

• Total value of proposals sent

• Number of proposals sent

2. Proposals won

Again, count both:

• Total value of proposals won

• Number of proposals won

These simple measures show whether you’re generating enough proposals, then winning enough of them, to reach your annual budget – which is another article!

3. Three-month weighted pipeline

This is what I call the ‘sleep well at night’ metric.

Use a CRM tool to manage the realistic opportunities that could turn into work over the next three months, and apply your estimated probability of winning them.

Revenue at creative agencies and consultancies is notoriously up and down, so this is your early warning system. Business development rarely yields quick results; if there’s a quiet period ahead, the sooner you know, the better.

People metrics

Our people are our most important resource. Here, I’m focusing specifically on data about how they spend their time.

I’ve written elsewhere about value pricing, but at most agencies and consultancies, at least behind the scenes, pricing relates to people’s time. It makes sense: people are our biggest expense.

1. Team utilisation

This means the proportion of available time your team spends on fee-paying work.

Note that it’s team utilisation. Your time management software will capture each individual’s utilisation, but you can examine those if the team figure dips and you want to understand why.

Combined with charge-out rates, utilisation has a major influence on what your business earns. In months of high utilisation, you should invoice more.

Targets differ by role. Junior team members’ utilisation will usually be higher, while senior people spend more time on management, mentoring and business development. The annual In Focus report from the Design Business Association (DBA) provides useful role-specific benchmarks.

2. Recovery rate

This is the proportion of the recorded value of client work that you actually bill to the client.

Utilisation tends to get most of the attention, but I’ve found it largely reflects how much work you’re winning. Lots of wins naturally lead to a busy studio. How much of that time you actually invoice is at least as important.

The DBA’s survey generally reports an average recovery rate of around 80%. In other words, agencies commonly effectively work around one day per week for free.

Assuming you’re breaking even, improving recovery through better scoping, pricing or management of additional requests should feed straight into profit.

Finance metrics

These are probably the most obvious metrics and, I suspect, the ones you watch most closely. I’m assuming you already monitor monthly income or revenue.

1. Gross profit margin

Gross profit is your fee income minus the direct costs of delivering the work. Gross profit margin expresses that figure as a percentage of fee income, making it a good measure of delivery profitability.

The WOW Company has an excellent guide and suggests a target of 50% or more for service businesses.

2. Operating profit margin

This is what remains after deducting operating expenses, including fixed costs such as rent, utilities, insurance, marketing and salaries for staff not directly involved in delivery. Operating profit margin expresses this as a percentage of fee income.

It’s a useful measure of underlying profitability because it includes the costs of running the business, before financing costs and tax. It should be considered alongside cash flow.

Targets vary by business type and size. As a broad guide, 20% is healthy and anything above 30% is considered high-performing.

3. Staff-cost ratio

This could equally sit under People. It measures people-related costs as a proportion of fee income. For most agencies and consultancies, people are by far the biggest cost, so it makes sense to monitor it closely.

The DBA has historically suggested around 60%, including freelancers, as a useful benchmark. Too high can damage profitability, while too low may indicate an overstretched team.

Quarterly and annual reviews

Alongside your monthly dashboard, it makes sense to use the data to take a higher-altitude view every quarter or year. You might consider:

• Conversion rate: traced further back through your business development activities.

• Average value of proposals won: worth increasing, as fewer, bigger projects will often be more profitable than numerous small ones.

• Client split: your number of clients, revenue per client. Ideally a sweet spot between depending too heavily on one or two clients, and being spread across too many.

• Existing versus new business: ideally a healthy mix rather than being heavily skewed towards either.

Decide what matters before choosing the software

There are numerous software packages that can capture and display these metrics. Many are extremely capable, but with sophistication often comes complexity.

Integrated packages claim to provide everything in one place. I’m not completely up to date with the latest offerings, but in my experience separate packages have worked better: a CRM for business development, a time tracker for people data and accounting software for finance. Your mileage may vary…

It’s easy to accept the metrics your software spits out, but I think that’s the wrong way around. Define what you want to measure and why first, then find and configure the software to provide it.

Look for patterns, not perfection

A dashboard is a management tool, not a set of audited accounts. The underlying financial records need to be accurate, of course, but that doesn’t mean every dashboard figure requires absolute precision.

Often, consistency is more useful. Calculate a metric in the same way each month and you’ll develop a feel for what’s normal. What matters most is the direction of travel: how this month compares with last month, the same month last year or your target.

This is why I prefer charts and graphs to spreadsheets full of densely packed numbers. A simple 12-month visual makes a trend far easier to spot.

Creative people tend to be visual. There’s no reason our management information has to be visually punishing.

My last tip is to be ruthless. If you find yourself gathering information you don’t act on, stop tracking it. Focus on data – but only the data you actually use.

Ultimately, your dashboard should help you understand whether enough work is coming in, whether your team’s time is being paid for, and whether that work is translating into profit. 

That’s what makes it a useful tool for running your business, rather than simply reporting on it.

What monthly measures do you find useful that I haven’t included?

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