5 Overlooked Metrics Your Agency Needs to Measure for a Profitable 2017
Running a business takes everything you have. Entrepreneurs pour their creativity, passion, effort, savings -- their everything -- into their work. And five years after they start, half of them are out of business. A decade later, two-thirds have called it quits. But why? For marketing firms, I believe it comes down to a lack of diligent measurement. Sure, measuring and tracking may not be the sexiest part of running an agency, but it's the only way to ensure you're not throwing money away. Commit to tracking these five things in 2017, and you'll have your most profitable year yet. 5 Metrics Your Agency Should Measure in 2017 1) Adjusted Gross Income per Full-Time Equivalent Employee Determining your number of full-time equivalent employees (FTE) is a convenient way to measure labor. To do this, denominate employees into 40-hour-a-week units. A full-time employee is equal to one FTE. A 20-hour-a-week employee is 0.5 FTE. Your target should be $150,000 of adjusted gross income (AGI) for every FTE. That amount should cover salaries, benefits, and overhead while leaving enough profit to reinvest in the business or offer bonuses to high-achieving team members. Years ago, the target AGI for each FTE was $100,000. Inflation accounts for some of the increase, but marketing agencies are also hiring expensive people to fill positions on growing digital teams. In short, the world has changed. It's gotten more expensive. Many marketing agencies haven't adjusted their billing rates to keep up -- and that's a big problem. If you're only earning $100,000 per FTE, your agency likely isn't very profitable. Those thin margins carry extra risk when an unexpected tax bill comes due, equipment breaks down, or you need a retention bonus for [...]