Digital Agency profitability showing dangerous trend
13 April 2011
According to Kingston Smiths report into the financial
health of the UK Marketing Industry, operating profits within digital agencies are
falling fast. Across the agencies they surveyed, operating profit per head had
fallen over 50% from £8K to less than £4K in just the 12 months to June 2010.
One of the main contributing factors is that the agencies headcounts had increased
12% in this time. Obviously this trend can’t be allowed to continue and digital
agencies need to find a way of improving their margins.
In our discussions with prospects we’ve found the most common
requirements amongst digital agencies is the need to really tighten up on the tracking
of over servicing of clients and jobs, as well as the % of their peoples time being
spent on non-chargeable work. In addition, better forecasting of new business
along with expected spend per existing client will also allow improved decision
making regarding recruitment vs use of freelances to fill skills/capacity gaps.
If you are a digital agency experiencing these issues, please
get in touch. We would be delighted to explain how we have worked with other
digital agencies to develop proven solutions to these problems and given them back
the visibility and control they need to run complex digital projects
profitably.
"The integration with Sage accounts has assisted with recording sales, leading to quicker debtor analysis and debt chasing, therefore improving cash flow for the business."
Julie Cole, Financial Controller, EDP