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Financial benchmarks for B2B marketing agencies

By Andrew Dalglish -

Are you normal?  As a business I mean.  If you’re running a B2B marketing agency do you really know how your firm performs relative to competitors?

It’s tough to answer this question with confidence.  After all, your competitors only share the legal minimum of information about performance.  Information which is also usually opaque and outdated.

Despair not though.  The 2011 B2B Marketing Agency League Table, compiled by B2B Marketing Magazine and Circle Research, fills in the gaps.

It’s a simple idea with a powerful result.  Have the UK’s leading B2B marketing agencies – 43 of them with combined billings of around £150 million – anonymously share key performance data.   Then, after independent verification of financial information, analyse the data to provide accurate performance benchmarks.

The full Benchmarking Report is available for purchase here, but in the meantime here are some­ key numbers to build into your business planning.

Click for enlarged infographic

The back bone of the UK’s B2B marketing sector is the mid-sized agency.  When any consumer projects are excluded, 37% of B2B marketing agencies in the UK bill £2 – 4 million.  The average annual turnover from B2B work is £2,863,803.

This income follows the Pareto principle where the majority of spend comes from a relatively small number of clients.  Typically, 28% of revenue comes from an agency’s single biggest client.

Similarly, the majority of clients come from just four sectors – Technology & Telecoms, Business & Professional Services, Engineering & Manufacturing and Financial Services.

When a handful of loss making agencies are excluded, the average pre-tax net profit margin on this turnover is 11.3%.  However, as an agency grows so too do its overheads and this eats into profits.  The average pre-tax net profit margin for a small agency (up to £2 million turnover) is 17%, but a mid-size agency (£2 – 4 million) sees this fall to 13.1%.  An agency turning over £4 million sees an average of 10.5%.

The single biggest overhead for most agencies is staff.  People management is an area of excellence though.  One in seven (15%) B2B marketing agencies cite attracting and retaining quality staff as their single biggest challenge.   However, at 7% the average employee turnover experienced by a B2B marketing agency is below the UK norm.

Food for thought.  How do you stack up?

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