Being a manager of an agency requires you to wear many hats. It doesn’t matter if you are preparing for a pitch or sending out proposals. You also need to communicate with clients. 

You must ensure that your agency is profitable, even as you manage all the above. While workflows can vary, the most important thing is to increase profitability.

How do you do this? You need to be vigilant about the metrics that make your agency profitable. It’s not something you can feel. Profitability is determined by actual numbers, and there are many factors that can influence these numbers.

We’ve selected and discussed seven key performance indicators you can monitor in Productive. These KPIs should be monitored to ensure that your agency is profitable.

KPI #1: Pre-qualified leads in your sales funnel

We are sure that you have a system for attracting leads and converting them to clients. But, the question is how can you measure your pre-qualified leads. This number can be used to predict where your sales will be over the next quarter. This is where the key is to concentrate on qualified leads.

KPI #2: Number Of Sent Proposals

Once you have the leads in your pipeline, it is important to close them quickly. Sending out proposals is the next step in your sales process. Many agencies find that proposals sit in their pipeline for more than a month. Sometimes, even several months. This can make it difficult to close the deal. You need to pay attention to this and look at the reports. Perhaps the leads in your funnel don’t have the qualifications to be new customers. Maybe your sales team requires a different approach to following up with them. No matter what method you choose, it is important to consider both the number of prequalified leads and the number of submitted proposals.

KPI #3: The Value of Your Sales Funnel

Your sales funnel’s value will allow you to forecast the future of your agency’s resource utilization, revenue, and profit. If you don’t close those deals, all that forecasting is useless. You need to have both a high closing rate and a high-value sales funnel. However, a higher closing rate is better than either of them.

All your sales metrics can be gathered under one roof to help you see your sales pipeline and make better decisions. To cover all the above, it is essential to have an integrated agency management tool.

KPI #4: Client Acquisition Cost

The cost to acquire a client (or client acquisition cost) is an important agency metric that can impact your profit. Your CAC is a measure of how much money your business needs to acquire new clients. It can also be used to determine how much you should charge for future projects.

KPI #5: Lifetime value of clients

An important KPI that agencies should be tracking is the lifetime value clients (LAC). Your LAC is the sum of all the revenue you receive from clients over the lifetime of your clients.

Knowing your average client acquisition cost as well as the lifetime value of clients will allow you to know how much it costs to acquire customers, how much you make from each customer and how long it takes to become profitable on a client by client basis.

KPI #6: Agency Utilization Rate

Most agencies monitor utilization on a daily basis. It all depends on who is monitoring this KPI, and how much. Each agency owner, project manager, or operations manager must ask themselves how effective their employees are working. This question can be answered by agency utilization metrics.

The agency utilization rate is a percentage of the time that a teammate spends on non-billable work. In other words, your teammates will track how much time they spend on projects internally or with clients. Because they are not directly working for clients, some teammates such as those in office management and marketing won’t be able to use their time on client work. It is important to consider billable utilization. The “billable” colleagues are those that can pay salaries, overhead, and any other expenses.

With agency management tools, you can easily monitor your usage and see a complete overview about where you stand in relation to these metrics.

KPI #7: Agency Profit Margin

Your gross profit margin (GPM), is simply your total cost of sales minus your total revenue. A higher gross profit margin will result in a better net income. First, you must monitor all expenses of your agency, including overhead and people costs.

Use One Tool to Monitor KPIs and Increase Agency Profitability

You can grow your business by keeping track of your agency KPIs. Your agency will have one point of contact that you can trust, which will help increase your profit margins. Let’s take a look at our selection of top agency management software and discover “the one”.