Agency doctor: Yearly agency health checks provide valuable insights

The fourth quarter of each year is the ideal time for agencies to run a health check, ensuring five key areas are performing as they should.

Richard Houghton: associate partner, Agency People
Richard Houghton: associate partner, Agency People

I have always thought that the agency business model is easy to describe – selling expertise packaged as time – but bloody hard to implement. So those running agencies rarely find time to take stock of how their business is performing. 

The fourth quarter business planning process is often the only time of the year we take a step back. So before you plough into setting 2015 growth targets, run an agency health check. Is everything under the bonnet as it should be? Will your plan be based on a solid platform?

While every agency is run differently and has its own culture, there are five consistent levers that management can pull to drive growth – people, client service, marketing, sales and finances. It’s these that the health check should investigate.

Let’s start with the people – every agency’s biggest asset. What’s your staff churn? Under ten per cent may cause problems with stagnation, but north of 15 per cent and you can have continuity issues. Are your internal values current and communicated? Is the team rewarded for living them? Are six-monthly reviews and objective setting being run on time? Are the personal objectives directly linked to what the business is trying to achieve? I could go on, but you get the picture.

On the client service side of things, have you developed and launched a service in the past nine months? If so, what revenue has it generated? If you haven’t it is time to make sure that a structured and resourced R&D process is part of your 2015 plan. New services are critical to growth in a sector changing as quickly as ours. Is your client loyalty process providing you with actionable information rather than a list of scores from a multiple-choice questionnaire? You want to be sure that your plans for growth are based on solid client relationships.

How is the marketing plan looking? Do you have a crystal clear sales and prospect policy? How many leads has it generated? And on the sales side, what is the conversion ratio for lead to pitch, pitch to client and what is the average client fee? 

If you know this then the business plan will have realistic, achievable and hopefully stretching targets – much more motivating than plucking a number from the air.

Finally, review the staff costs as a percentage of fee, overheads as a percentage of fee and be honest about how much time you give away for free – sorry, your ‘over-servicing levels’. How does the fee per head compare with the average for your sector or discipline?

If you get into the habit of running your health check annually you’ll not only have a honest snapshot of the health of your agency but also a guide to where the management time needs to be directed, as well of course the basis of a motivating and profitable business plan.

Richard Houghton is an associate partner at Agency People

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