In last month’s issue you may have seen the feature on B2B Marketing’s 2014 Agency League Table.
By now you may even have read the full report. Here I’d like to share a few gems that you won’t findin either.
I’ve been wading around in the raw data that underpins the league table and in doing so haveunearthed some benchmarks that agency leaders will find especially useful.
Let’s look at the top line first. The average agency turnover is £4.8 million (up 13 per cent from2013). However, as averages mask the extremes a more useful approach is to identify quartiles. Thesecan be used to see where your agency sits relative to the rest of the agency population. So here we are:
·The bottom quartile (i.e. first 25 per cent of agencies) turnover up to £1.3 million.
·The second quartile turnover £1.3 to £2.9 million.
·The third quartile turnover £2.9 to £5.2 million.
·The top quartile turnover £5.2 million plus.
What really matters though is profit. The average pre-tax net profit margin in 2014 was 13.6 percent, and again this can be divided into useful bands:
·The bottom quartile sees a net profit of between one per cent and six per cent.
·The second quartile: sevento 12 per cent.
·The third quartile: 13 percent to 20 per cent.
·The top quartile 21 percent plus.
A key driver of this profitability is headcount as staff are usually an agency’s biggest cost. On average an agency generates £85,509 of turnover and £8,450 of net profit per employee. So, if your ratio is below this, it may indicate productivity or over-staffing issues. A possible solution is a greater use offreelancers who represent a more flexible cost. You wouldn’t be alone in doing so – 84 per cent of agencies use freelancers, with the ratio typically being one freelancer for every 11 full-time staff members.
