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3 Lessons Digital Agency Owners Can Learn from Nick Suckley?

The book “Start. Scale. Sell. 75 Lessons for Business Success” arrived on Friday morning and I have finished reading it by Sunday. The book just flows and is an easy read with concise lessons and examples. I believe any agency owner reading this would relate to most lessons Nick Suckley learned building and selling Media21 and Agenda21. I have picked out 3 that hit the cord the most with me being involved in helping digital agency owners manage and plan their financial side.

What can you, Digital Agency owner, learn from Nick Suckley’s experience?

  1. Measure your KPIs but don’t overcomplicate. Simplicity is key if you want to understand and use your numbers. The list of key performance indicators Nick uses is:
  • Pipeline – number and size of potential customers. If you do not have a sales strategy or there is no real sales pipeline, this will hurt the business most in the long run. You cannot leave new business to luck or referrals. This is unsustainable if you wish to grow. Imagine your best earning client decided to bring it all in-house or move the service you provide to another agency which usual mean you receive an email saying “we are bringing all our digital marketing under one roof and agency XYZ can do it all”. New business is the top 1 reason agency owners are stressed and anxious. Having data on sales pipeline will give you clarity and focus.
  • Pitch-to-win ratio – how many potential clients you converted via pitch or proposal. This is important as it will give you an understanding if your pitch material works and where you need to make changes. Correct positioning can help here too.
  • Billings per head – measure how productive your team is and if you are over or under servicing clients. The more efficient your team can be the more billings per head you can have.
  • Income-to-salary ratio – measure how profitable and productive the company is. If this ratio is too high you need to cut salary costs or increase your billings.
  • Gross profit margin – how good you are at charging clients.
  • Net profit margin – how profitable you are.
  1. Boost profitability – use the right tools. Nick calls this Profit Improvement Programme (PIP). You need to understand how each area of your business is generating income and what are the costs associated with it. Track each service you offer and associated team’s Profit and Loss (P&L). You might have media, paid search, SEO, social, affiliates and analytics services. You would match income with team costs for that service and any other associated expenditure. This will give you the profitability for each service area you provide. Nick has the Golden Rule which each team leader has to follow. This is – staff cost cannot be more than 50% of the income generated. If you follow this rule, you will have enough left for the general overheads and your own pay. Get this right and you will see great improvement in your net profit margin.
  2. Never make a loss. This is a tough but most important rule in my view. Nick Suckley argues that by not making a loss you do not lose control. Making decisions quickly when times are tough, cutting costs and staff will save your business. These are the toughest decisions for any owner but can mean survival or going under. That’s why having up-to-date and accurate financial information will make a difference and provide the data you need to make those vital decisions. You will have the gut feeling that things need to change, or things are not going quite right. Having your financial reports in good shape will help you understand the situation better.

What can you do right now to make a difference to your business?

Take these 3 steps today and you will be on the path to success:

  1. Measure, measure, measure. Decide on your KPIs, measure and report on them at least monthly. You will need to track staff hours spent on client work, service team P&L, sales pipeline and anything else you decide is vital in making business decisions. Start with simple Excel spreadsheet and build from there. You don’t need to overcomplicate it.
  2. Analyse your management reports monthly. Review your accounting function and make sure you have accurate data at least monthly. If you do not have management reports, then look at your P&L and Balance Sheet as a minimum.
  3. Set net profit percentage you want to achieve and maintain. Do everything you can to keep it above this level. Paying yourself is the number one priority.

If you are not sure where to start, we can help you get started and support your agency with providing accurate and up-to-date accounts information, reports and tracking. Get in touch with us today.

 

What is Xero Business Snapshot?

Business Snapshot is a dashboard-style report displaying business performance measures to help you better understand the financial position of your business at any given time.

Examining your key business metrics regularly will help you keep on track with your growth. The dashboard gives you a snapshot of your income and spend and highlights if there are any issues with payment collection from your customers. If you don’t look at your balance sheet regularly, this gives you a summary of your liabilities to have in mind when planning your cashflow.

Xero Business Snapshot


Dashboard features:

  • Profit and Loss – you can view your profit before tax for last month, last quarter, last year or year to date with instant comparison to previous period. Instantly see if your profit has increased or decreased as a percentage against previous period.
  • Income and Expenses – see a summary of your income, cost of goods sold plus operating costs as a figure and a chart. You also see the percentage comparison against the prior period.
  • Gross Profit Margin – monitor your gross profit margin and how it changes compared to prior period.
  • Latest Operating Expenses – instantly see the highest costs and comparison to previous spend. You can pick up areas where the spend has gone up or reduced significantly.
  • Financial Position and Cash – this gives you a snapshot of your balance sheet which is vital for understanding your liabilities at any given time.
  • Overall Cash Balance – see the total of all your cash across all bank accounts.
  • Average Time to Get Paid – the average number of days it takes your customers to pay you.  Identify in an instance if you need to address how you collect your payments or if you have bad paying customers.
  • Average Time to Pay Suppliers – how long do you take to pay your suppliers. If it is outside your credit terms, do you need to address this to improve your relationships with your suppliers?

Xero Business Snapshot 1


To benefit from using Business Snapshot dashboard you need to have at least a couple of months’ worth of transactions in Xero. Keep your bank reconciliation up to date too to see the correct cash balance.

Use the dashboard to discuss your organisation’s financial health with us or your accountant.