Josh LanceJosh Lance
Helping Your Bottom Line: 4 Quantitative Goals for Digital Agencies

Helping Your Bottom Line: 4 Quantitative Goals for Digital Agencies

Identifying quantitative goals are important for any business, but are especially important for digital consulting agencies.  Since the majority of the work is project based, it’s important to take a look at the business from a top-level view to identify goals that are important so that your agency can grow to the level you’re aiming for. The four quantitative goals discussed below can help you grow your bottom line and bring long-term success to your agency.

Revenue Growth

The first goal to identify is revenue growth. While a simple goal, it’s important that this goal is based on a knowledge of the industry at large, as well as the historical activity of your business.  If your goal is 20% revenue growth year over year, that should be anchored in data and make sense for your business. If your historical revenue growth is 5%, the industry at large has stagnated, and you don’t have sales and marketing activities that are helping to drive that growth, then 20% might not be realistic.  However, if you have had historical 20% growth, the industry at large is growing, and you have active sales and marketing efforts, 20% growth may be very realistic.

Target Gross Profit Per Project

The second goal to identify is a target gross profit per project.  Growth profit per project is how much revenue you receive on a project less your direct costs for the project.  Direct costs can be supplies and materials used for the project, as well as any subcontractor costs you will pay out. Direct costs would not include an allocation of salaries or overhead.  A target gross profit per project goal is important because not meeting your target will cause your net income to suffer and may lead to cash flow issues.

Wages as Revenue

The third goal is a target of wages as a percentage of revenue.  This goal is important as wages are usually one of the largest expenses for a digital consulting agency. If your actual wages as a percentage of revenue is higher than your targeted wages as a percentage of revenue, that means  either your wages are higher than they should be, or your revenue is lower than it should be, or a combination of both. Conversely, if your actual wages as a percentage of revenue is less than the target, that would mean you have room for bonuses or wage adjustments.

Net Income 

The fourth goal is a net income goal.  This could be an actual number, a growth percentage from last year or a percentage of revenue.  We typically look at this as a percentage of revenue and set a target. This is an important goal, as we are looking at the bottom line of the business. The saying goes… revenue is vanity, but net income is sanity.  This is where the rubber meets the road, and an agency that is not profitable or meeting its net income goals is an agency that will not exist in the future.

Setting these goals is important, but even more important is tracking the metrics for these goals on a regular basis. You won’t know if you’re on target to hit your goals if you’re not regularly tracking them.  By tracking these metrics on a regular basis, you can make changes to your agency to get your goals back on track. Also, there could be other metrics that you may want to track in your business (like the current ratio or the net variable cash flow metric) that can give you further insights into your business.  But you don’t want to go overboard on this either. These four quantitative goals are a good place to start to help you grow a profitable digital consulting agency.

About Josh Lance

A licensed certified public accountant (IL) and Chartered Global Management Accountant, Josh is also a family man who calls Chicago home.  Before venturing on his own with a mission to help small businesses, Josh spent his early career at a top-10 national public accounting firm before working at an ultra high net worth family office.  Josh is also an adjunct professor at Northwestern University in Evanston, IL.  He enjoys making wine at home, cooking, traveling, and cheering on his favorite football and soccer teams. Josh was honored by being selected to the 2017 class of the AICPA Leadership Academy and was named as one of the 40 under 40 in 2017 by CPA Practice Advisor.