You know that your marketing agency is only as good as the team you’ve assembled. Of course you’ll want to hire the best people you can for each position you have to fill. But how do you measure your team’s overall contribution to your agency’s success? As you map out how you’ll manage your marketing agency in 2017, don’t forget to keep track of this key metric: your agency’s revenue per employee.
Calculating the revenue per employee for your agency is simple.
But it’s what you do with this info that counts. First, you can track how it has changed over time. Is the trend your friend? Or has it been declining over recent years? You can also track how it compares to your industry. For example, comparing the revenue per employee of Yahoo vs. Facebook reveals a lot about the relative health of these two digital giants; the numbers on the left side of the charts show they are operating on completely different scales.
What’s a good benchmark for revenue per employee at a marketing agency? It depends on what kind of marketing agency you own. It’s far from a perfect science, but some observers have pegged the benchmark for a traditional marcomms agency at $150,000. For a digital marketing agency, i.e. one that focuses on SEO, social media, email marketing, pay-per-click ads and content marketing, an accepted benchmark for revenue per employee is slightly higher, at $200,000.
If you’ve just run the numbers, are you blown away by how well your agency is doing? Or are you feeling less self-congratulatory? What should you do if your agency seems to be falling short on this metric?
What to do if your marketing agency’s revenue per employee is lower than it should be
Step 1: Target efficiency
If your agency’s revenue per employee disappoints, the first thing to remember is that this metric is only indicative. To be of real value, it must be put in the proper context, which means you must perform some research to understand its causes. Your team members are your best detectives. Talk to them to find out what their typical workflow is like. Do they feel like they’re struggling to keep up with their current workload while the metric is showing those struggles aren’t being rewarded? If so, consider:
- Is your agency suffering from scope creep? Do your client engagements always seem to end up expanding beyond what was initially agreed? And do you neglect to update your proposal or letter of engagement — and importantly, your fee schedule — to capture this?
- Are tasks taking longer and using up more resources than you were aware of? At Emphatic our agency clients are turning to our custom social media content solution because they’ve found that curating, crafting, posting and scheduling content across multiple social media networks takes longer than anticipated and blocks their staff from working on more lucrative projects.
Based on input from your team, find out if you can get greater efficiency in your marketing agency by doing any of the following:
- Reducing time spent on operations: Which daily tasks are eating away at your team’s time? Would outsourcing these free up your team for more revenue-generating activities? Make a list of possibilities and talk over the current requirements with your team. For example, you should consider how many hours are spent creating social media for your clients and whether using a service might be a better solution.
- Automating your client support and team knowledge sharing: Which questions are your team members constantly fielding from your clients? And from each other? Can this function be handled by a short video, an FAQ page or a knowledge base? It might seem counterintuitive to ask an already stretched team to help produce these pieces, but the investment will pay off once they notice how much time these new assets have freed up for them.
- Speeding up approvals: Where are the approval bottlenecks, both within your team and between your agency and your clients? Can any of your internal approvals be replaced with a comprehensive checklist? For client approvals on content, can you implement a policy which automatically grants approval if you don’t hear back from them within X days? Taking this one step might completely change your team’s stress level and ability to get things done.
Step 2: Transform downtime to business development time with your team’s help
After looking at the efficiency side of the equation, ask yourself and your team if you can generate more revenue by better managing your downtime. Are there any sales initiatives your team might help you with when they are not working on client deliverables? These can range from compiling a list of upcoming networking opportunities in your town to hosting webinars on your agency’s behalf. To get buy-in from your team, do two things.
First, try to pair these initiatives with the team members who have displayed a genuine interest in them, or have a knack for them. Do you have someone on your team who’s always aware of the newest businesses and grand openings in your town? Ask them to be your point person to attend Chamber of Commerce events. Or do you have someone who’s always up to speed on the latest social networks, or who loves to learn about growthhacking? Ask them to attend the local American Marketing Association meetings and other marketing-focused meetups. Second, emphasize that these initiatives are an opportunity for their own professional development. If you’ve hired the right people and communicate well, they’ll readily agree. (Assuming they do not already feel overwhelmed by their day-to-day responsibilities, that’s also where the previous tips on efficiency can help.)
As with the marketing strategies you provide to your clients, the key to improving your agency’s revenue per employee metric is to test, observe and repeat. As you try out new ways of working, you’ll want to make sure that you’re not improving this metric at the cost of other important ones like employee morale, employee turnover and, of course, profitability. But with those important caveats in mind, your focus on this key metric will help your agency have a smoother, more successful 2017.
Do you pay attention to your marketing agency’s revenue per employee metric? What insights have you learned? Share with us in the comments!