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Using Databox | Mar 30
Elise Dopson on October 8, 2019 (last modified on October 10, 2019) • 14 minute read
A client’s Facebook ad with a CTR of 15%? Fantastic.
A 100% year-on-year increase in revenue for your client’s website as a result of your SEO strategy? Even better.
But when it comes to keeping your eyes on the figures, it’s easy to put your clients first and leave your marketing agency to fall behind.
It’s important to track KPIs for your marketing agency to judge the current (and future) state of your business. You might find that one channel is generating the best clients, or that there’s a simple tweak to your onboarding process that could help with retention.
Yet without tracking key KPIs for your agency, you won’t find them.
So, we asked 29 marketing agencies to share their holy grail metric. We’ll talk about the KPIs your marketing agency needs to have on its radar, including:
Click the links above to jump to a specific KPI, or continue scrolling to learn about the marketing agency metrics you need to be tracking.
“Monthly recurring revenue is the most important metric to track as a regular heartbeat for the health of your agency,” writes Brian Casey of IMPACT Branding & Design.
Monthly recurring revenue (MMR) simply means the value of monthly contracts your agency controls. For example: If you have two clients on a monthly contract of $500 each, your MMR would be $1,000. That’s the figure you’re (almost) guaranteed to earn per month.
Casey continues: “Focusing too heavily on macro metrics such as revenue and profit margin can trick you to lose sight of the sustained health of your agency. [However,] MRR helps you analyze how well you’re retaining clients, measure growth and momentum, and forecast budget accurately.”
Growth Hackers‘ Jonathan Aufray adds that tracking this metric helps with other tasks: “If you know approximately the revenue you’re going to do the following month, you can easily plan your recruitment, your advertising budget, etc.”
*Editor’s note: View the financial state of your marketing agency with our Stripe dashboard. You’ll be able to view the metrics we’ll mention here, including your agency’s MRR, all in one place:
Monthly recurring revenue simply states how much revenue you’ll generate over a month.
Adam Ostapinski of UnAgency has a metric similar to MMR, but doesn’t look on the revenue you generate each month: “I would concentrate on Monthly Recurring Profit (not revenue).”
“To track this one, you need to cover all of the income and expenses separately for one-time sales and long term projects.”
Ostapinski continues: “Tracking MRR only might get you into the trap of over-investment, cash flow disruptions, or wrong hiring decisions. Understanding how much recurring profit you have allows you to make smarter business decisions. In case your growth starts to slow down, this factor will help you identify the trend and respond proactively.”
“Having this factor under control also allows you to tweak its components (like recurring cost of ads, sales commission fees, project operations’ cost) and observe the results from MRP perspective.”
“It would help if you also calculated averages for the whole company and then compare this data with each of the projects you run. This way, you will be able to select low hanging fruits and improve whenever it’s possible based on actual data,” Ostapinski summarizes.
“My number 1 KPI for Anvil has been net margin,” says Kent Lewis. “The reason is that I can’t create a sustainable agency if the company isn’t profitable. I’ve never had an unprofitable year, but I have had very rough years.”
Your agency’s net margin is the profit you’ll receive after your expenses have been paid, as Ata Khan of Xoobo, LLC explains: “Net profit would be total revenue generated minus advertising costs and overhead.”
(For example: If your contracts are worth $500,000 per year but your staff costs, advertising fees, and software subscriptions amount to $150,000, your net profit would be $350,000.)
Kent Lewis adds: “What gets measured, gets managed, so best to manage profitability above all else, unless you have a trust fund.”
Luke Nicholson of Exposure Ninja agrees: “Without profit margin, all other KPIs become useless or even dangerous. Acquiring new clients and keeping old clients is only beneficial to your business if you’re able to turn a profit on servicing those clients.”
And as Spdload‘s Maksym Babych summarizes: “You could manage tones of KPI’s but if your [profit] margin still 0%, you lose.”
Do you know how much revenue each member of staff brings to your agency?
According to Guy Bauer, who uses the billings per FTE metric for Umault, “this tells you if you’re over-staffed (if the number dips below $135,000) but also shows you if the market is paying a premium for your services (if it goes above $250,000).”
Since it’s tricky to calculate, it’s worth plugging your figures into this FTE calculator to view how many full-time equivalents your marketing agency employs:
Then, take your figure and divide it by your yearly revenue. That final amount is your billing per FTE.
For Colibri Digital Marketing‘s team, Andrew McLoughlin thinks that ROI is “the single metric that will put everything else in perspective.”
“Let’s say you have one customer, with a lifetime value of ten million dollars. That sounds great, but what if it cost you twenty million in advertising to bring him in? ROI is a quick way to check whether you’re in the black, and whether your business is healthy.”
In fact, this is the most common marketing agency KPI that our experts are tracking:
Stephanie Neusser of Sana Commercealso tracks this agency metric “simply because [it] looks at both sides of the coin: the investment, but also the return (which we measure as MRR: monthly recurring revenue).”
“It’s easy to get qualified leads at a high cost, but it’s far more challenging to do the same in a cost-effective way. Therefore, instead of focusing on more top-funnel metrics like impressions or generated leads, I prefer to focus on metrics that align agencies with the rest of the marketing department’s efforts and tie back to our overall business objectives,” Neusser adds.
Taking that a step further, Omar Fonseca of Medicare Plan Finder advises to track “ROI Cubed (Return on Investment, Intention and Impact).”
“That is because companies focus only on the bottom line – e.g. the actual return in dollars or in % of dollars spent. But when done, the nuances and intricacies of your marketing investments and how they provide value to your business are missed.”
Fonseca continues: “ROI Cubed is a combined marketing measuring metric, the 3 I’s represent not only the original Investment but the Intention and Impact of your marketing efforts.”
“For a company to unlock its marketing team’s full potential and empower them to achieve true impactful results, they must track ROI Cubed which allows companies to realize a true positive alignment of Return on Investment, Intention, and Impact!” Fonseca summarizes.
“Naturally, the health of your agency relies on the satisfaction of the customers that you are providing your service to,” says Directive‘s Liam Barnes.
“Retention rate is important to take into account because you want to ensure that the rate of acquisition is higher than the rate and cost of losing customers.”
Alistair Dodds of Ever Increasing Circles adds: “Without a high retention rate you’d better have one heck of a good sales team to always be bringing in new leads and converting them.”
(Not only that, but improving your retention rate could save your marketing agency money–and reduce the revenue you’ll need to generate to make a profit. It costs five times more to acquire a new customer than retain an existing one.)
Jeremiah Rizzo says the team at Adwords Nerds “measure our retention simply through subscribing customers.”
“These customers pay monthly, and we use either Stripe, or similar payment systems to put them on a monthly pay plan. To find our KPI, we simply measure the % of how many clients who come to us for a once-off project, end up staying on for monthly service.”
Similarly, Nozzle‘s Boyd Norwood thinks that “as an agency, it takes a lot of time, resources, and efforts to gain new clients and so you want to do all that you can to keep clients happy and on your books.”
“If your client average length of time is increasing, it means your team is doing great work and, as a result, your maintaining the hard earned monthly revenue, your clients are more willing to send referrals your way, and your team is more excited about their work.”
Jordan Brannon of Coalition Technologies concludes: “We focus on customer retention to evaluate the health of our agency. If our customers continue to pay us, month in and month out, beyond their initial contract terms, we know we’re providing value to them, in a way they feel confident investing in.”
*Editor’s note: Unsure how many of your clients are leaving you? With our Stripe (MRR & Churn) template, you’ll be able to see your churn rate–the percentage of clients cancelling their contracts with your agency:
“Everyone knows that it’s much cheaper to maintain an existing client than acquire a new one. While lead generation is a key indicator that your agency’s marketing efforts are working well, LTV shows you how well you are able to drive revenue and retain them,” E2M Inc‘s Jaykishan Panchal says.
“The true understanding of LTV is the recognition that a client should represent more than a one-off transaction; each client should be a relationship and testament to how well you [as an agency] are able to continuously find new opportunities for mutual growth.”
Panch continues: “A strong LTV indicates that your agency is doing more than just bringing in quality leads, but discovering new ways to retain them.”
Launch Space‘s Nico Prins also thinks “Customer Lifetime Value is the most important KPI to track as a marketing agency [because] every other metric is a result of the value that you provide to your customer. If you can deliver on your promise and help your customers achieve their marketing goals, your business will organically grow through referrals.”
Miriam Kung of PixelMe agrees: “It’s crucial to know the revenue each customer brings in over their lifecycle with your company. This feeds into knowing who your most important customers are, how much to spend on paid acquisition, forecasting growth goals, and more.”
Andrew Ruditser of MAXBURST, Inc explains how this impacts your marketing agency: “This is an important metric to track because it is much easier to increase the expected revenue a valued customer will contribute to your company over their lifetime rather than acquiring new customers.”
“This is because that person is already a loyal customer, therefore it is must easier/cheaper to focus on their wants and needs rather than attracting new customers who might not remain loyal and continue to contribute to your company.”
Penguin Strategies‘ Kristin Grages adds: “While profitability is critical, the KPI that gives us the best sense of the health of our agency is our customer lifetime value. This metric is a combination of the length of the customer’s engagement with us and the profitability of that account over time.”
“CLV speaks to the facets of our agency that are most important to us. A healthy score reflects excellent service, a relationship that is valued on both sides and an appropriate sales process. A high customer retention rate aligned with a high customer lifetime value ensures our agency is both profitable and stable.”
Summarizing, Bonjoro‘s Casey Hill says: “Successful agencies are able to generate results and built LTV with their clients, while agencies that I have seen struggling, will get a client, and then lose them for future business (logo churn).”
“A good sales metric to monitor is the new leads to opportunities KPI,” says Eric Melillo of COFORGE.
“This metric helps the sales manager evaluate potential points of friction within the first few prospect touchpoints. New lead interaction is key to agency success. A quick prospect reply and good content alignment will help improve the amount of MQLs that turn into SQLs.”
“In my experience at various agencies of all sizes and also from working with internal marketing departments, the most important KPI you should be tracking as a marketing agency is your what the primary lead source is for your business pipeline,” says Appleton Creative‘s Doug Stewart.
“In other words, how is your agency acquiring clients? This is something that, as advertisers, we incessantly preach to our clients, but is often overlooked in self-practice.”
Stewart agrees: “Knowing the differences between leads that are coming in via word-of-mouth (WOM) versus pay-per-click ads could be a key factor in seeing positive year-over-year (YoY) growth for your team.”
*Editor’s note: Unsure where the majority of your leads are coming from? Click here to grab our HubSpot (Leads by Source) dashboard to see whether direct, referral, or organic search drives the best leads for your marketing agency:
According to Steve Kurniawan of We Know SEO, “sales closing ratio is the most important metric for a marketing agency [because it] can give insight about the overall performance of the agency.”
“We can divide sales closing ratio into two different metrics: lead to prospect ratio (often called lead to quote ratio), and prospect to close ratio.”
“If the lead to prospect ratio is high but the prospect to close ratio is below target, then our marketing efforts are working, but we have a problem in the sales/account department. On the other hand, if the prospect to close ratio is above target but the lead to prospect ratio is too low, then we have a problem with our marketing strategy,” Kurniawan adds.
“The majority of marketers that we partner with track the number of qualified leads — specifically marketing qualified leads (MQLs) and sales qualified leads (SQLs),” says Giselle Bardwell of Kiwi Creative.
Marketing Qualified Leads are potential clients your marketing team has identified, who may have come from a targeted Facebook ad from your agency’s Page. MQLs haven’t yet been approved by sales.
Sales Qualified Leads, on the other hand, are leads who’ve been passed from marketing teams and approved by sales. It’s estimated that just a quarter of MQLs pass to this stage.
Bardwell continues: “These two terms are hallmarks of the inbound methodology and can help boost a business on many fronts.”
“The number of qualified leads in the pipeline is a great measure of future agency health–if we have a high number of qualified leads in the pipeline, a decent close rate, and a manageable sales cycle, the agency’s runway is generally healthy.”
LyntonWeb‘s Jennifer Lux thinks: “Tracking NPS scores is critical to ensuring customer success for our team.”
They do this by “surveying customers every 30 days to keep our pulse on their experience, and addressing any gaps in our service delivery more proactively, based on their scores, gives us actionable insight into the health of our client portfolio.”
You can calculate your NPS through a simple Excel formula:
But if you’re asking for feedback through survey tools like SurveyMonkey, you can skip the manual calculations and allow your software to generate the figure itself.
Notice how each of the marketing agency KPIs we’ve mentioned here touch on the financial aspect of your business?
Digital Ads Optimism have a different approach, as Morgan Bachemin explains: “One KPI that marketing agencies should track (though many don’t) is employee happiness. Employee satisfaction is a huge indicator of the health of your agency.”
“High employee turnover increases the cost of training, decreases overall morale, and increases the likelihood of churn with clients.”
Bachemin continues: “It’s important to check in with your employees frequently – on a weekly basis if possible. Not only does the happiness of your employees matter in its own right, but low employee satisfaction could be the result of poor processes or poor management that needs to be corrected.”
As you can see, there are many metrics your marketing agency should be tracking.
However, you shouldn’t just treat one as your holy grail. Be like our who track several KPIs for their marketing agency:
The best way to stay on top of your analysis is to treat your agency like a client. Block in time to regularly review these metrics, and find ways you can improve each KPI.
Granted, it doesn’t have a direct ROI–but it’s bound to stand your marketing agency in good stead for the future.
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