How healthy is your agency?
Today, we’re helping you answer this vital question: identifying 15 crucial Key Performance Indicators (KPIs) that play an essential role in understanding and improving your agency’s performance.
How to Use Agency KPIs
In the simplest terms, the metrics covered here allow you to monitor changes in your agency’s revenue, profit and resource utilisation.
Most of the metrics included can (and should) be calculated for customers, employees, teams and projects alike – allowing you to identify successes and problem areas, whether they’re efficient employees, low prices or resource-intensive customers.
It’s important to remember that absolute numbers alone aren’t that revealing, and these metrics need to be compared over time, in terms of relative percentages.
For example, increasing your billable time by 10-hours a week seems good in absolute terms, but if you’ve hired an extra employee, it may be that the average billable hours per employee has actually decreased.
Resource Management KPIs
These are metrics that look at your agency’s ability to effectively utilise its key resources – particularly the time and skills of your employees - and turn them into profitable work. For an effective way to calculate these metrics, you can use a dedicated Resource Management tool.
1) Project Summary
A project summary is a high-level look at the all of the projects your agency is currently working on.
It’s a good idea to review your project summary each week, and include:
- List of all active jobs
- Number of late/under budget/over budget projects
- Estimated hours vs actual hours
- Estimated expenses vs actual expenses
2) Adjusted Gross Income (AGI)
In simple terms, AGI is a measurement of taxable income. Importantly, it also functions as an accurate measurement of the size of your agency, and how it changes over time.
3) Customer Income
This shows you how much you’ve billed per customer, per month, versus how much you’d expected to bill. If you’ve billed less than expected, it’s important to discover exactly why you’ve missed your target.
4) Customer Profitability
Income measurements can be misleading, and sometimes large projects can generate little in the way of profit. Customer profitability metrics allows you to gauge the real value of each customer, and identify your most profitable types of work.
You’ll also be able to analyse exactly why your profits are so low – whether you estimated badly, set prices too low, or chose a poor-fit customer.
5) Billable vs Unbillable Hours
Timesheets allow you to compare the number of billable hours your employees generated, versus the number of unbillable hours.
6) Utilisation Rate
By dividing actual billable hours by total available billable hours, for employees, departments and the entire agency, you’ll be able to track how efficient your agency is at using available time for billable work.
These are metrics that look at your ability to generate new leads, and convert them into paying customers. CRMs (like Pipedrive, HubSpot CRM and Salesforce) are useful for calculating these.
7) Pipeline Size/Value
This refers to the total number of leads (and their value) at each stage of your sales pipeline, measured over time.
8) Funnel Conversion Rate
This is the rate at which leads progress through your sales funnel – turning from leads into MQLs (Marketing Qualified Leads), SQLs (Sales Qualified Leads) and customers. By comparing over time, you can analyse the efficacy of your lead nurturing strategy,
9) Customer Acquisition Cost (CAC)
CAC is a measurement of the cost of acquiring a single new customer. By comparing it with your average deal size, you’ll be able to justify spending on advertising, marketing, new hires and so on.
10) New Business Forecast
Armed with the previous KPIs, you’ll be able to forecast future work (including close probability, projected and actual contract value, projected and actual close date, etc.) – allowing you to plan ahead and predict future availability and any need for new hires.
These are metrics that help you keep track of invoices and outstanding payments – essential for improving the consistency and predictability of your cashflows.
11) WIP Report
A summary of the work completed but not yet billed for, often measured monthly.
12) Outstanding Invoice Report
A summary of all open invoices.
13) Accounts Receivable Aging
This shows how long it takes for clients to pay you, from when the invoice was sent, to when payment is received. If your largest customers also take the longest to pay, your agency could suffer from extremely high cashflow volatility.
These are metrics that look at the relationship between your agency, its customers and its employees.
14) Customer/Employee Satisfaction
Your relationship with customers and employees has a huge impact on your agency. By using tools like the Net Promoter Score (NPS), Customer Satisfaction Score (CSAT) or even simple survey software, you can quickly gauge the happiness of employees and customers alike.
15) Customer/Employee Turnover
The greater your turnover of customers and employees, the less predictable your workload will be. By monitoring turnover alongside satisfaction, you’ll get valuable insights into the reasons customers and employees choose to leave your agency.