Article - The KPIs all Digital Agencies need

articles finance mindset operations tools / process systems Apr 08, 2020
Article

READ: 5 mins
AUTHOR: Janusz Stabik

Two of the most frequent questions I'm asked are: 

  • Can you give me the KPIs that my agency needs to measure?

  • What KPIs are other businesses tracking that I should track as well?

Unfortunately, it’s not as easy as that. The KPIs to measure are those that are applicable to your vision and your business model, not anyone else's.

Thankfully it's not a difficult task, just think like an Olympian.

  • Pick a sport

  • Set your sights on a medal

  • Train hard, remain FOCUSED

  • Measure your progress

Bearing in mind….

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A sprinter measures:

  • Calories
  • Lean muscle mass
  • Reaction times
  • Running speed over a set distance

But these are entirely different to a weightlifter, which are different again from a sprinter, discus thrower or gymnast.

Digital agency KPIs to use
 

A weightlifter (probably) measures:

  • Muscle mass
  • Bodyweight
  • Calories
  • Weight lifted

Equally, the benchmarks they'll measure against are entirely different. Whilst both will measure 'Calories', a sprinter is likely to target a much lower number of daily calories than a weightlifter.

The moral of the story is - the numbers that are important to measure are ONLY those are relevant to the goal you’re trying to achieve.  There is no single set of KPIs which are applicable to all businesses.

So what does this mean for businesses?  Firstly, you need to figure out what sport you’re competing in. 

Sport: Figure out your business model 

Are you an agency or consultancy? Are you ‘selling time’ or fixed-term projects? Do you have a product which can be scaled quickly?  If you don’t know the sport you’re in, don’t pass go, don’t collect £200. And you can’t compete in multiple sports (not if you want to win in both of them).  It’s REALLY, REALLY hard to win an Olympic medal, it takes commitment, drive and a single-minded focus.  Trying to win a medal in 2 sports means diluted effort in each, whilst competing against some very focused competitors.

Pick your sport, attain tunnel vision and train hard.  The business model canvas can really help here: https://www.strategyzer.com/canvas/business-model-canvas

Set your sights on a medal: Visualise your goal 

If you don’t know what you’re working towards and what the end goal is, then how do you know where to focus your efforts and what success looks like?  Do you want to exit and take home a cool £2M?  Or perhaps you’d like to take a step back and receive a healthy dividend every year? 

No goal is better than any other, but there is a goal which is right for you, and you need to know what it is.

Measure progress to keep on track

If you've completed the above, defined your business model and visualised your goals, now you should have an understanding of what the right KPIs are for your business, vision and goals. For example:

If you’re looking to exit then you’re probably measuring:

  • Turnover & EBIT

  • Utilisation/billability

  • YoY growth

  • Customer/revenue retention 

However, if you’re looking to build a 'Small Giant', then you might measure:

  • Employee retention

  • Employee salary versus market rate

  • Awards won

  • eNPS

And don't forget, the benchmarks which you measure against are entirely dependant on your vision. Consider the following where both agencies are measuring utilisation:

  • Company A - Is targeting a 55% utilisation rate as they’re looking to exit and would like to spend more time on employee engagement and retention

  • Company B - Is targeting a 75% utilisation rate as profitability has been historically low and they need to build up sufficient capital to fund future growth without taking on additional debt

Summary

No two businesses are the same and no two business owners are running the same race, so you can’t measure their progress in the same way.  Instead, figure out where you want to be and how you’re going to get there with a kick-ass strategy, and the relevant numbers will emerge.  Only then can you become a focused, single-minded, elite, tunnel-visioned athlete who trains hard, eats well, gets external advice and keeps pushing forward even when it’s cold and wet outside. (Ok that’s enough analogies for now...).

Want to talk on this further? Send me an email and I'll get back to you!

Janusz