You’ve Got Creativity Sorted, But Are You Profitable?

It goes without saying that being creative is who you are, and you love it. You get a big buzz from working with great people, delivering creative value and building up a customer base of happy, satisfied clients.

But just because you’re busy, doing loads of work and bringing in new clients every month, it doesn’t necessarily make you profitable. You’re only truly profitable when the agency is bringing in the money needed to meet your long-term business plans and objectives.

So, the question we have for you is: are you profitable?

The Warning Signs of Bad Profitability

So, how do you know if your creative agency isn’t profitable? It’s not just about looking at whether there’s cash in the bank – that’s for sure. In fact, analysing your entire business model and internal processes should be the first step in assessing your profitability.

In reality, profitability has to be built into the DNA of the agency in order to ensure a real return on your creative work. And if your underlying business model isn’t delivering, it can have a serious effect on the future of the agency.

Here are some warning signs to look out for:

1. You don’t properly quote jobs – are you raising proper quotes for each project and making the scope and the fees crystal clear? ‘Project drift’ and extra work you can’t bill for will have a serious impact on your end margin.
2. You can’t identify your profit margin per job or per client – if you don’t know the margin, you don’t truly understand the cost of delivering the work, or the potential profit you can make from each project.
3. You’re so busy, you don’t have time to care about profit – if you’re running round in circles to meet deadlines, you won’t have enough time to think about making the agency a more efficient, profitable beast.
4. Your tax bill was higher than you thought – paying your tax bill is hardly a surprise, so if you’ve not planned for it (and put money aside) you’re not really focused properly on your financial management.
5. As long as you have cash in bank you’re happy – having money in the bank doesn’t mean you’re profitable; it means you have cash NOW. But how much of this cash is already accounted for? And how much will you have in 6 months or when your next payroll is run?

Practical Ways to Boost Your Profits

Are any of these warning signs familiar to you? If so, don’t worry – it’s not terminal. These are the tell-tale signs of a lack of focus on profitability, and recognising them early means you can do something proactive to resolve these issues. It’s never too late to take action.

Here are a few practical ideas to help you sort this:

1. Use WorkFlow Max to manage projects – managing your work-in-progress is vital to making your agency efficient and profitable. WorkFlow Max is a cloud solution that helps you manage project timelines, record time and deliver the whole job in the most profitable way. (Talk to our in-house, Workflow-Max-certified expert Martyn if you need help.)
2. Use CrunchBoards to analyse performance – set up CrunchBoards’ business intelligence software and have monthly management information sessions with us to review your budgets, targets and profit performance.
3. Take a step back from the business – take a half-day out of the business every week. Come see us, get a breather and have a chat – and by doing so, get back some perspective on how the business is doing from the outside.
4. Focus on your tax strategy – be absolutely crystal clear on what tax you will owe and which reliefs you can claim. Make sure you’re putting the right percentage of your profits away each month to foot your annual tax bills.
5. Plan for seasonality – business activity is never completely stable 365 days a year. There are peaks and troughs where you will bring in less money – and you need to have funds squirrelled away to get you through the lean months.

Have a chat with us about your profit plans 

Turning your agency around from being loss-making to profitable isn’t something that will happen overnight. It takes time, planning some real attention to detail. But by following the five steps above, you’ll start seeing the impact on your bottom line.

As we said, it’s about having profitability built into the agency’s business model from the ground up. With that solid foundation, you’re in much better shape to become a profitable, and highly creative, business.

If you think you could be getting more profit from your creative agency, contact us to arrange a chat.

We’ll soon have you understanding the merits of profits versus cash, and your numbers looking a whole lot healthier!