You may have read my recent post about B2B Marketing’s 2014 Agency League Table (if not, take a peek here). By now you may even have read the full report. In this post I’d like to share a few gems which you won’t find in either.
I’ve been wading around in the raw data which underpins the League Table and in doing so have unearthed some benchmarks which agency leaders will find especially useful.
Let’s look at the top line first. The average agency turnover is £4.08 million (up 13% from 2013). However, as averages mask the extremes a more useful approach is to identify quartiles. These can 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. 1st 25% of agencies) turnover up to £1.3 million
- The 2nd quartile turnover £1.3 – £2.9 million
- The 3rd quartile turnover £2.9 – £5.2 million
- The top quartile turnover £5.2 million+
What really matters though is profit. The average pre-tax net profit margin in 2014 was 13.6%, and again this can be divided into useful bands:
- The bottom quartile see a net profit of 1% – 6%
- The 2nd quartile 7% – 12%
- The 3rd quartile 13% – 20%
- The top quartile 20%+
A key driver of this profitability is headcount as staff are usually an agency’s single biggest cost. There’s another useful benchmark here. 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 of freelancers who represent a more flexible cost. You wouldn’t be alone in doing so. 84% of agencies use freelancers with the ratio typically being 1 freelancer for every 11 full-time staff members.
How does your agency fare?
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