Aim for the Holy Grail: 100,000 per head revenue
"The no.1 KPI is to be doing what you love"
Jason Neale | Founder | The Agency Works
> How would you explain what “aim for the Holy Grail: 100,000 per head revenue” means?
> What do you think about this ‘advice’?
> Would you give this advice to other people?
> If not, what alternative advice would you give to agency leaders?
> What is Jason Neale's opinion on the most important performance metric in an agency?
How would you explain what “aim for the Holy Grail: 100,000 per head revenue” means?
This statement refers to the agency achieving £100K of GP or revenue per FTE resource across the “entire” agency.
Therefore it should include all “non-fee earners” So for example in an agency that has a FTE count of 20 people the GP should be £2m.
The other ratios that should run alongside this are, % of total salary costs to GP (aim for 60- 65% as 55% is impossible!) and your overhead % should be around 20%.
What do you think about this ‘advice’?
I think it’s a good measure to aim for; but can also create negativity in an agency. A lot of agencies I work with were not started to generate high profit margins (20% EBIT+) or to sell. They were created because the founders had a passion for their industry and wanted to be the masters of their own destiny.
If your sole aim is to achieve the £100K per head KPI, then the agency must run to very strict commercial objectives and that is often not in line with how the founders wish to run their business, hopes, dreams or aspirations.
See this spreadsheet example of how challenging £100K per head is. I have also highlighted the effect of changing average charge rates or hours contracted per week. (note I have used averages that I know are true across most agencies)
Would you give this advice to other people?
I regularly converse with agency heads on the holy grail of £100K per head. And if selling the agency at some point in the future is on the agenda, then this will be just 1 of the KPIs (of which there are several) that a prospective buyer will be interested in.
If not, what alternative advice would you give to agency leaders?
My advice to agency leaders is consistent; run the agency in a way that either achieves your objectives or run it in a way that makes you want to still walk through the door everyday.
What does good look like to them?
If they are not looking to sell the agency, and are happy for the business to achieve 10% EBIT with a happy smiling workforce then that has to be good!
However if they are looking to sell the agency in” X” years and they have a figure that they wish to achieve (normally £5m) then the agency will need to be commercially and operationally disciplined to achieve the KPIs required to get the valuation. This may not be easy to run alongside other values the agency holds.
What is Jason Neale's opinion on the most important performance metric in an agency?
No.1 KPI is to be doing what you love.
After that the KPIs that I would always be looking at are:
GP per head
Cost per head
Staff cost % to GP
Overhead % to GP
No of hours sold across disciplines
Recovery / profit by client
Recovery / profit by type of work
I believe if you are on top of these and are managing them to your objectives then you will always be in control of the agency.
Humble promo of Jason Neale and The Agency Works
Jason Neale knows his agency numbers inside out - I wouldn't be surprised if he dreams about KPIs at night. On a more serious note, I don't know many people who have seen under the financial and operational hood of as many different variations of agencies as Jay has. Within a few minutes he can tell you exactly how much money you should be making to make your business sustainable, or able to grow. If you're looking for advice on your agency finances and operations, I'd highly recommend a chat with Jason - he's always mega helpful and I am sure he will have some good solutions for your.
Daniel (Polymensa founder)
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Founder @ Low&Behold
"It is one of the agency myths or bullshits, because it ignores all the other dynamics in your agency"
Chief Operating Officer @ Strategiq
"I think it’s useful to have quick and easy benchmarks to refer to"
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"Why focus on one metric when there are lots to think about. A doctor doesn’t stop at blood pressure"
COO @ Great State
"I wouldn't exclude it from recommendations but it would be part of a wider set of things to consider."
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