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Maximizing Profitability Through Strategic Financial Planning for Marketing Agencies

    

8 min read

outsourced accounting for marketing agencies

You can be the marketer and have the top marketing talent working for your agency, but if you don't have a financial strategy in place, then you aren't likely to be financially successful. 

Key Takeaways

No matter how exceptional your marketing skills may be, a financial strategy and good financial management are vital to running a successful marketing agency. 

So, while an excellent marketer can produce excellent marketing materials, they must have business and financial savvy to transform their marketing skills into a successful marketing agency. 

Outsourced Accounting Pricing For Marketing Agencies

Develop and Implement an Effective Financial Strategy to Improve Your Marketing Agency's Profitability in 10 Steps

1. Set SMART Goals

If you don't know where you're going, then you'll never arrive. Of course, you want your marketing agency to be successful, but how do you define success in your agency? Does success look like expanding to new markets, increasing brand recognition, tapping into neighboring regions, generating a higher level of revenue, expanding your services and deliverables, increasing profit margins, selling the agency for a profit, successfully transitioning leadership, or something else?

To create a successful financial strategy, you must first have a clear understanding of what the goal of your strategy is. You must first be able to imagine a future vision for the agency so that you can understand what success looks like. You then need to set SMART (specific, measurable, achievable, relevant, and timely) goals to help you turn your vision into a reality. Setting SMART goals is truly the first step in the process of developing a financial strategy. (Hint: It's important to write down these goals and keep them somewhere safe. When you write down your goals, you are 42% more likely to achieve them.)

Begin this step by setting long-term goals, such as five or ten-year goals. For example, in five years, you want to generate 50% more revenue than the agency generates today. 

Now that you have a long-term goal, determine the short-term benchmarks that must be met to achieve the long-term goal. So, to achieve 50% growth in five years, you need to aim for 10% growth annually and 2.5% quarterly. 

Now, determine the actionable steps that must be taken to facilitate that growth. What employee directives will you set to increase customer acquisition, improve customer retention, and increase customer lifetime value? On what schedule will you need to hire additional employees to handle the increased volume? How soon can new employees be trained and operating at full capacity? How will your office space, expenses, and budget need to change to accommodate a higher volume of clients, services, and employees?

Read More: The Pros and Cons of Outsourced Accounting Services for Businesses

2. Align the Entire Agency With Its Goals

When you've set goals, you need to ensure that every aspect of the agency is aligned and working toward the same goals. You do not want to have different departments or teams moving and working in different directions. This is costly, will slow down your progress, and can also damage your culture. From the c-suite to human resources to IT to sales, your whole agency needs to be provided with benchmarks and goals of their own that are designed to support your greater vision for the agency. 

3. Have a Plan for Measuring and Tracking Progress

SMART goals must be measurable, and this means that you need to have systems in place that facilitate the measurement of your progress. For most businesses, these systems come in the form of automation tools and technology that automatically collect and organize data. These systems can primarily be financial but, in a service business, it is also important to track non-financial data such as employee time (and how much is considered billable or non-billable hours), client information, sales funnel information, services, and more. 

By integrating third-party applications into your agency's accounting system, you can transform your accounting software into an enterprise resource planning tool that will help you set a variety of goals and analyze data from multiple angles to support your financial strategy and keep track of your progress as you work toward achieving your goals. 


Don’t know where to start? Here you go… 

The Top 6 KPIs to Track Profitability and Performance In Your Business

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4. Track the Most Important KPIs for Marketing Agencies

There are an endless number of key performance indicators (KPIs) (also called metrics) that you can track in your business. You don't, however, want to waste time looking at metrics that aren't relevant to your agency or its goals. Instead, identify the KPIs that are relevant to marketing agencies and to your goals and watch those closely. 

Some of the most valuable KPIs for marketing agencies include:

  • Net Multiplier
  • Utilization Rate
  • Monthly Recurring Revenue
  • Monthly Recurring Profit
  • Gross Profit
  • Net Profit
  • Return on Investment
  • Retention Rate
  • Customer Acquisition Cost
  • Customer Lifetime Value
  • Leads to Opportunities
  • Sales Closing Ratio
  • Primary Lead Source

5. Always Make Three Budgets - and Use Them!

A budget provides a roadmap for your financial strategy; it tells you exactly how you've decided to use the agency's financial resources. Create three budgets: one with reasonable/likely projections, one with worst-case scenario projections, and one with optimistic projections. This way you'll be prepared to handle any challenges or leverage any opportunities that come your way. 

Read More: 10 Reasons Why Your Marketing Agency Should Outsource Your Accounting

6. Regularly Revisit and Revise the Budget

No budget is perfect. You should regularly (i.e. each month) revisit the budget. Compare your actual numbers to your projected numbers and make any necessary adjustments so that you stay on track for the year. 

7. Get on Top of Your Cash Flow

Cash is king, and you need to manage your agency's cash flow (the timing of the money flowing into and out of the business) to remain operational. Keep a close watch on your cash flow and use cash flow forecasting to help you foresee, plan for, and avoid cash flow shortages. 


“It's extremely efficient and it's value-ridden for us because for the money that we pay GrowthForce and what we get, is just ... it far exceeds anything we could expect out of hiring a staff of people to do the same thing. ”

-Andy Cauthen

President, PlanNet Marketing

How this booming marketing agency gained insight to profitability right out of the gate:  Read the full case study here. 


 

8. Know Your Costs and Optimize Your Pricing Strategy for Deliverables and Services

You need to know the true cost of operating your marketing agency - especially direct costs such as direct labor. How much does it cost you to have an employee write a blog, design a website, create a logo, or shoot an interview? If you don't know these costs, then you can't price these services accurately.

Accurate, optimized pricing is an essential component of your financial strategy, as it generates the revenue that makes profits possible. You can't sell your way to profits; your prices need to be set so that they cover your costs and have a built-in profit margin. 

9. Support Your Back Office With Automated Processes

Manual processes are inefficient, slow, inaccurate, and expensive. Whenever possible, you should be replacing manual processes with automation tools. Automating your back office with accounting software such as QuickBooks or Sage Intacct and third-party integrations will help you get a handle on your agency's data while saving time, saving money, and improving the accuracy and reliability of your reports. 

10. Outsource Financial Management Expertise

An in-house bookkeeping and accounting department is extremely expensive and difficult to manage. Having a back office that is completely in-house is kind of like managing a micro-business within your marketing agency. Instead of taking on this enormous challenge and expense, agencies can outsource their bookkeeping, accounting, and even CFO processes to third-party providers. This saves money and time while helping to improve the overall operation of your business. 

Look for a provider that specializes in service businesses, like marketing agencies, who has experience in your industry. This will help ensure a thorough understanding of your business's back-office needs. 

Create, Implement, and Support Your Financial Strategy With Outsourced Accounting for Marketing Agencies

You're an expert in marketing, and outsourced accounting service providers are experts in financial strategy. Using outsourced accounting for marketing agencies will help you set goals and establish the financial strategies, structures, and procedures necessary for achieving them in your agency. Whether you're hoping to grow your agency at lightning speed, merge with another agency, or expand to new markets, an outsourced accounting partner can provide you with the financial management expertise, tools, technology, and systems to make it happen. 

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