Profitability: Marketing agencies

Knowing true profitability is one of the biggest challenges that marketing agencies are facing in the last few years since sometimes they do not get the total revenue after an important campaign, in which normally a lot of money is invested in order to attract a greater number of customers.

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In any marketing agency, everybody from managers to freelancers has problems of a different kind that condition their results and development; many people ignore they have these problems or minimize them believing that they are not important or that if more people are hired or more money is invested on resources, they will be able to solve them.

However, far from being problems that can be solved with money or with people that do the work nobody wants to do, it is possible that marketing agencies are mistaken in the direction of their actions, which is something usual when there are so many activities to do in so little time under the demands of the day in a global market that does not sleep.  

The goal of this article is that you find out, through different approaches that you can use as alerts, why marketing agencies do not know their true profitability and how they can get this record. 

1. Not knowing the income of the agency after the last job. 

Many marketing agencies assume that they know what is their profitability in each campaign, but the truth is that most of the time, they do not have the exact amount of money they get after closing a campaign. How do you know what campaign or project made more profits for your marketing agency? 

Let's imagine you have a women's clothing company as a customer, and you manage the content of their blog with a copywriter that, apart from writing articles for your website and social media, he/she also writes for your customer.

After a month in which the copywriter has written a small number of articles for them, they expect to increase the number of articles because they do not want to hire a creative, full-time writer when the needs of their blog are very specific. 

However, they ask your agency to provide the services of your copywriter over and over again, so you have to update the budget regularly so that this commercial exchange keeps on being profitable but with so many updates, how do you know that your marketing agency is not losing money to the ambitions of your customer?

When you calculate the income as the result of the total revenue minus expenditures, you do not get the real number; this leads you to believe that you need to get more customers and expand your work team in order to earn more.

Maybe the organization should focus less on billing or on getting customers and more on training the employees, measuring expenditure in real time, estimating time and selling its services at a price that allows it to keep the expected profitability margin. 

2. Not knowing the productive capacity of your agency.

When you offer services, you are selling hours of work. You can calculate the productive capacity of your team by multiplying the working hours of each employee. However, this is almost never accurate because not all hours are productive or because some tasks are carried out by freelancers.

Not knowing the available hours to sell your products or services to the customers can lead to errors in the budget, deadlines overlay, work teams collapse, and a need to resort to emergency solutions. 

Knowing the productive capacity of your marketing agency is key to understand how much money you can bill and what strategies you need to implement for the growth of your company. 

3. Not using accurate information to calculate your budget.

Marketing agencies usually have a fixed budget for certain projects without having in mind that maybe they are using time inefficiently or that their processes are outdated.

Having accurate information to calculate the budget for your services and projects will help you understand how profitable your company is and make strategic decisions to increase this profitability. 

4. Not having well-defined roles in your agency.

When you do not have well-defined roles in your agency, it is difficult to calculate what budget should be assigned to what activity and the time this task will take to be carried out. It is very important to delimit each role and function inside the company so that you save time and money; as a result, you will have more efficient processes and more effective outcomes.

Consequently, you will find it easier to know the real profitability of your company when all your employees are assigned specific responsibilities.

5. Not having financial indicators of profitability.

Without indicators, there are no real numbers to show the financial status of your company nor its true profitability. There are several accounting digital tools to measure the income and expenditure of your company quickly.

6. Not having automated processes. 

Finally, one of the reasons for not being able to know the profitability of your company is not automating your manual processes. Automation allows you to increase the productivity of your team and, if you have more productive employees, your projects and campaigns will be more profitable.

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In conclusion, marketing agencies do not usually know their profitability because they do not have an average estimate of their revenue per service or project; they do not have indicators to measure the productive capacity of their teams and they resist automating their manual processes. Therefore, if you recognize some of these symptoms in your agency, it is time to think about changing.