You’ve Earned The Money, Now Bank It!

Posted by Ray Kieser, Agency Practice Director on April 27, 2016

How to turn revenue into profit blog series

The marcoms industry has been somewhat tumultuous during the last couple of years meaning agencies have been focused on doing the basics right – not always able to push the boundaries when it comes to creativity or internal growth. 

However, today’s environment, while tougher than it ever has been, seems to have settled into what we are now calling the ‘new normal’. 

This new landscape encompasses many aspects from intensifying procurement demands, heavier client pressures, changing roles and decreasing margins but the one that is arguably the biggest cause for concern is the last one. 

Agencies are seeing revenue increase across the board but it is becoming harder and harder to transform that into profit, meaning that teams are not recognising enough financial success for the work they put it in.

This in turn becomes an issue for the whole agency, it shouldn’t just be an isolated problem for finance teams or management. A sense of commercialisation must be ingrained into every aspect of the creative process so to ensure teams are working together to maximise profit levels. 

A recent roundtable I attended explored this concept – looking at how agencies could make all staff consciously active when it comes financial health. It was a rigorous discussion with many sharing their own experiences and anecdotes related to billing models, staff resourcing and interpretations of the role of the finance team.

Many of the themes highlighted at this event were reflected in a recent report we have developed in conjunction with Bob Willott, editor of Fintellect. Bob is a well-respected industry commentator and has a strong grasp on what it takes to create a financially successful agency. He states that the two primary resources required to run a marcoms agency are people and bought in supplies – both within management’s control – and questions then, why agencies are struggling to make a reasonable profit. 

In reality though, both he and I, and no doubt the readers of this blog, will know that it is never that simple and there are many aspects to consider. These aspects can include, but are certainly not limited to, the type of clients the agency has, the remuneration model used and how teams are resourced. 

Our report, ‘Five ways to turn revenue into profit in the creative industry’ will take readers through key issues such as these, drawing on Bob’s expertise and broader industry insight from the roundtable.