The 3 W’s of Financial Stability for Digital Agencies
Are you feeling worried about your current financial situation? Do you feel stressed about everything it takes to run a business? Most successful digital agencies are operating at a 20% Gross Margin (the revenue left over after the cost of servicing that revenue). Take a look at your forecast to see if you are operating near that margin, and what needs to be added (revenues) or cut (costs) to achieve that goal. Let us help you gain some focus by looking at the 3 W’s of Financial Stability for Digital Agencies
What resources are you allocating? Debt will always make it difficult to reach financial stability. Pay close attention to credit cards that have a high interest rate. SAAS drives a lot of costs for digital agencies. Have you signed up for many of them with monthly billing but don’t even know what you’re paying for? Take a trial month and sit down with your accountant to really look at the details of your expenditures. You may find there are services you no longer use, or may not be worth the cost that you’re paying for them.
Rent is also a big cost for many agencies. As artistic designers, you need a space to impress clients and show that you are a successful company. Plan for this when looking at space and factor in the cost for design into your budget. When signing a lease, make sure to negotiate termination clauses up front. If you have rapid growth you don’t want to have a long-term least that can’t support your employees.
Finding, Winning, and Retaining New Clients Your website is how potential clients perceive your company online and should be invested in smartly. As technology changes rapidly, you need to make sure you are keeping your website up to date with the latest and greatest design to show you are current with changing trends.
Be sure to put client case studies on your website. They are a great marketing tool that’s free and easy. Client case studies are a way to showcase your successes and attract new clients. Be sure to provide specific performance results where you increased revenues of your client. It’s always great to include comments from your clients about their satisfaction of the project.
Instead of one-off project billing, consider ways to make recurring revenue from your clients. Think about where you can bill monthly for a fixed set of services to maintain the systems you put in place for your clients. Some of this may keep your employees busy when they are in between projects.
Finding New Talent . We’re hearing from many of our clients that they have a tough time finding new employees and have to pay above market rates. Your employees are EXPENSIVE. Have a yearly forecast for when you will be hiring new employees. Make sure that the project revenue is either secured, or has a high probability of signing, before extending offers. There’s nothing worse than having a high earner sitting at a desk doing nothing.
Consider contract employees in the meantime if your long-term project sales are intermittent. It’s essential to remain agile and still deliver quality solutions.
Your agency may grow from a small shop to a company with over 20 employees rather quickly. Make sure to streamline your work processes and employee onboarding as early as possible. It’s essential to get new hires up to speed quickly and ensure you’re delivering the product on time with the quality your clients have come to expect. As you grow, you may need to hire an office manager to oversee the day-to-day functions of the office while you concentrate on product development for your clients.
Proper allocation of your resources, finding the right clients, and recruiting the right talent will set your digital agency up for financial stability and long-term success.