KPIs – what the hell are they?
Klingon Planetary Interceptors? King Penguins Igloo? Kill Profits Instantly? Well, in actual fact, KPI stands for Key Performance Indicators…but if you don’t pay enough attention to them when running your agency then Kill Profits Instantly may well apply too.
KPIs are the landmark figures and targets you set your agency. They’re an incredible way to keep tabs on performance, growth, sales and even on customer satisfaction. And if you pay the right attention to KPIs, you’ll see the impact on your bottom line and the ongoing future health of the agency.
So, here are the 4 KPIs we believe every digital agency MUST know. Get your notebooks ready, class!
1. Net profit per job and month
Profits: they’re what drive the agency. But too many creative agencies put making those all-important profits down to luck and a ‘fingers crossed’ style of financial management.
To be profitable, you need to understand more about WHY and HOW your profits are made. That means having a drilled-down overview of your numbers and setting clear, monthly targets. Know what net profits you’re making each month, for each client and for each job. And really keep tabs on those results.
And, crucially, understanding how the profit margins on these jobs add up. Which clients are bringing in profits and which ones are dragging you down? Armed with these profit KPIs, you have a brilliant overview of the best ways to bring revenues in (and secure the future of the agency).
2. Team satisfaction
You’re a good boss, right? And your team are the best, aren’t they? Every agency owner will no doubt answer a resounding ‘yes!’ to both of those questions. But how do you really know?
Setting KPIs for team satisfaction is one way to get to the truth of the matter. Put processes in place to ask your employees how they’re doing and then systemise the output. And do it regularly (and make sure they can be as honest and transparent as possible too).
Every person on the team can mark their overall satisfaction with their role, their workload, their pay and their relationships with the rest of the people in the agency (including you, however much this might bruise your delicate ego). And by systemising this and pulling the data into your software you’re giving yourself some tremendously valuable information.
A happy team is a productive team – and a productive team are a profitable team. So being able to measure that happiness over time, and spot the dips and the highs will let you and your managers become much better at the people management side of running the agency.
3. Customer satisfaction
Closely linked to team satisfaction is customer satisfaction. If a happy team is important then happy customers are even more vital to the future success of the agency.
Measuring how satisfied clients are with your creative services should be an ongoing process. And setting KPIs for this customer satisfaction gives you an astoundingly useful way to see whether you’re delivering the goods.
Send a short survey to every client at the end of a project. Ask them to rate your service and tell you what they liked, what they didn’t like and what they’d change. And pull all this gold back into your systems.
If a client shows an ongoing dip in their satisfaction, based on your KPIs, you know something’s amiss. And, armed with that knowledge, you can start doing something proactive to put the smile back on the client’s face.
4. Value of lead pipeline
Do you know the value of your lead pipeline? (We’re talking about a pipeline for lead enquiries here, not a pipe made out of lead – we’re not turning into business advisers for plumbers!).
When someone contacts you with a sales enquiry, or you send out a quote to an interested target, there’s potential cash tied up in these leads. If you can convert all these leads into shiny sales figures, then that’s money on the bottom line. But wouldn’t it be great to know the possible value of that whole lead pipeline now?
By setting lead KPIs and measuring the value of those leads, you can get a much zippier view of your cash flow. AND you make better-informed profit predictions for future months and quarters (not to mention knowing when to give the sales team a swift kick when leads are looking thin on the ground).
Create systems for tracking your KPIs
So, we hope you can see the amazing value of keeping on top of these core KPIs. And the real key here is using software, apps and your underlying systems to track, measure and report on these targets.
Data is a wonderful thing (as accountants, you’d expect us to say that…but it really is). And by creating a central software system that can slice, dice and generally ‘jiggle around’ your business information, you’re better armed to set those KPIs, measure them regularly and pull of beautiful reports to show the rest of the team.
If you’d like to find out more about tracking gross profits, customer satisfaction and (possibly) the answer to why Penguin biscuits looks smaller these days (check…they do), why not watch our YouTube video on the numbers your creative agency should be tracking.
And if you don’t believe us, listen to what Mark Stringer, MD of our client, Ahoy, has to say about the importance of tracking those agency KPIs.
