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AGENCYmeasurement
‘20// SoDA + Unanet, January 2020
Agency Measurement Practices
Tom Beck

Executive Director
Chris Craig

Board Member
SoDA Webinar :: January 30, 2020
AG EN CY
METRICS
T H A T M A T T E R
SoDA recently partnered with Unanet to explore business performance
measurement within agencies, production companies and design studios.
We assessed the relative breadth, sophistication and transparency of
measurement practices and compared several important benchmarks for
2019 performance. This presentation is a summary of what we found.
Respondent Overview (n=137)
50% SoDA Members
20% less than $5MM
Annual Revenue
31% between $5 – 10MM
17% between $10 – 25MM
11% between $25 – 50MM
22% greater than $50MM
66%
completely independent with
no external investment
Ownership
20%
independent but with some
external investment
08% owned by a holding company
06%
owned by another type of entity
(consultancy, private equity, etc.)
30% Consultancy
Agency Type
14% Integrated Agency
10% Production Company
05% Product/Service Design
05% Other
36% Digital Agency
88% Independent 36% Digital Agencies 68% Small & Mid-Sized
// SoDA + Unanet, January 2020
DATA PRACTICES
Key findings from our online survey fielded with
agency leaders in October-November of 2019.
// More reports from SoDA @ www.sodareporton.com
Becoming more “data-driven” is a common mantra across the marketing industry. A strong majority of agency
leaders say they are data-driven, but the study results indicate at least some gap between intention and action.
Data-driven or not?
of agency leaders characterize their
agencies as “data-driven” when it
comes to managing the operations of
their own business.
80%
data-driven
17% We rigorously track and utilize a broad range of metrics to
optimize near-term business performance and make
anticipatory decisions against a longer-term forecast.
Expert
46% We track a broad range of metrics to optimize near-term
business performance but we tend to stay focused on
what's right in front of us.
Proficient
30% We track common financial and operational metrics but
tend to utilize data in a more reactionary way. We know
where we need to improve but have not yet invested.
Competent
07% We track limited financial and project-related metrics. While
we are beginning to develop our capabilities, we tend to be
more focused on the delivery or work for our clients.
Advanced Beginner / Novice
// SoDA + Unanet, January 2020
61% of agencies report that they are transparent in sharing key operating and financial metrics with the entire
organization. The remainder tend to keep performance numbers within the management team and/or owners.
Transparency
14% We adhere to open book financial reporting for all
employees to access.
Extremely Transparent
47% We share a broad range of financial and operating
metrics with the entire organization, including
annual revenue and profit margin.
Transparent
28% We share broad operating metrics with the entire
organization but confine financial performance to
the management team.
Moderately Transparent
11% We share broad-based operating metrics with the
management team but detailed financial
performance is known only by founders/owners.
Limited Transparency
1 Revenue (64%)
Metrics Shared with the Entire Agency
2 Revenue Growth Rate (53%)
3 Client Satisfaction (51%)
4 Sales Pipeline/Forecast (48%)
5 Project Profitability (47%)
6 Utilization Rates (46%)
7 Profit Margin (46%)
8 Employee Satisfaction (45%)
9 Average Billing Rates (41%)
10 Employee Turnover Rate (23%)
// SoDA + Unanet, January 2020
When it comes to operational performance measurement, agency leaders point to data accuracy, action and access
as the top pain points. Determining what to measure or communicating to the organization are lesser concerns.
Barriers to better measurement
// SoDA + Unanet, January 2020
Ranking the Biggest Data Challenges
40% Interpreting/understanding the
data I have.
34%
Getting the right data in a timely
fashion or when I need it.
31% Determining which metrics are
most important.
21% Disseminating the most relevant
data to my organization
57% Getting accurate data.
Accuracy
47% Acting on the data I have.
Action
45% Getting the data I need.
Access
We explored agencies’ adoption of 41 metrics across four areas of the business– Finance/Operating Metrics,
Project Metrics, Sales/Account Metrics and HR/Employee Metrics. While not intended to be exhaustive, the study
provides a spectrum against which to compare the relative depth of agency measurement programs.
A wide range of metrics
Everything and Nothing
Across the 41 metrics explored in this study, no
single measure saw 100% adoption and, on the
opposite end, every single metric was utilized by at
least 38% of the respondents. This suggests that
outside of the core metrics related to revenue,
margin, utilization and sales pipeline, there is little
common adoption of measures that might provide
a fuller view into the overall health of the business,
culture and client relationships.
87% Gross Margin
79% Cash Flow Forecast
78% Utilization Rates
77% Sales Pipeline Activity
77% Sales Forecast
Top 5 Metrics Most Commonly Used*
* For the purposes of this survey, we assumed that, at a minimum,
everyone was tracking basic financial metrics such revenue, profit
margin, cash balances, etc. As such, these were excluded from the
“what are you measuring” questions.
// SoDA + Unanet, January 2020
We want to be measuring…
Agency leaders point to a number of metrics they’d like to be measuring and tracking, but currently are not.
Metrics related to sales and project-based measures are predominant in the Top 5 list.
of agency leaders would like to be
measuring the average time (in days)
from when a project closes to when it
actually starts… the highest unfulfilled
need of the 41 metrics we explored.
38%
average lag in project start date
1 Average lag from project close to start (38%)
Average effective/realized rate per project (38%)2
New employee on-boarding input (37%)3
Average cost per sale (36%)4
Average sales cycle (35%)5
Top 5 Metrics Agencies Want to Be Tracking
// SoDA + Unanet, January 2020
KEY MEASURES
The most- and least-adopted measures across four
categories: Financial/Operating Metrics, Project Metrics,
Sales/Account Metrics and HR/Employee Metrics.
// More reports from SoDA @ www.sodareporton.com
Finance / Operating Metrics
The most and least commonly used operating metrics from our survey respondents (% who track).
// SoDA + Unanet, January 2020
1 Gross Margin (87%)
Cash Flow Forecast (79%)2
Utilization Rates (78%)3
Payment Velocity* (74%)4
Cost of Goods Sold (74%)5
Most Common Operating Metrics
1 % Cost of Contract/Freelance Labor* (46%)
Capacity – Existing vs. Sold (54%)2
Loaded Cost Per Billable Employee (54%)3
Average Effective / Realized Rate (63%)4
Average Billing Rate (69%)5
Least Common Operating Metrics
* Payment Velocity was defined as “the average time,
in days, from invoice to payment received.”
* % cost relative to loaded costs of billable FTE’s.
Project Metrics
The most and least commonly used project metrics from our survey respondents (% who track).
// SoDA + Unanet, January 2020
1 Project Profitability (74%)
Hours – Actual vs. Budgeted (74%)2
Avg. Billing Rates per Project (72%)3
Project Gross Margin (66%)4
Most Common Project Metrics
1 Average Realized Rate per Project (43%)
Project Duration – Planned vs. Actual (47%)2
Project Budget Burn Rate (62%)3
Project % Complete (63%)4
Least Common Project Metrics
Sales / Account Metrics
The most and least commonly used sales and account metrics from our survey respondents (% who track).
// SoDA + Unanet, January 2020
1 Sales Pipeline (77%)
Sales Forecast (77%)2
Revenue by Project Type (67%)3
Average Win Rate (64%)4
Client Satisfaction (64%)5
Most Common Sales Metrics
1 Average lag from project close to start (38%)
Average Sales Cycle (42%)2
Revenue by Client Vertical (43%)3
Average Cost per Sale (46%)4
Revenue by Lead Source (52%)5
Least Common Sales Metrics
HR / Employee Metrics
The most and least commonly used HR and employee metrics from our survey respondents (% who track).
// SoDA + Unanet, January 2020
1 Employee Performance (75%)
Avg. Employee Tenure (74%)2
Exit Interview Comments (70%)3
Annual Employee Turnover (69%)4
Reasons for Employee Departure (66%)5
Most Common HR Metrics
1 Employee Professional Certifications (45%)
Gender Pay Gap (46%)2
Onboarding Interview Comments (54%)3
Employee Diversity (55%)4
Employee Satisfaction (63%)5
Least Common HR Metrics
TRACKING
Unanet takes a look at how to more easily track and
report on some of the more important operating metrics.
// More reports from SoDA @ www.sodareporton.com
Utilization
Utilization is one of the most commonly
adopted metrics, but there is still some
variation in how agencies define the %
relative to variables such as PTO, time
worked on sales proposals, time worked
on over-budget projects and other factors.
// SoDA + Unanet, January 2020
// SoDA + Unanet, January 2020
Gross
Margin
87% of respondents said they track
gross margin at the aggregate level.
Once you’ve got that under your belt, it’s
important to dive more deeply and
isolate gross margin performance by
client, project or even individual.
// SoDA + Unanet, January 2020
Gross vs.
Net Margin
Gross margin provides a critical view into performance, but unless
you can contextualize it relative to net margin (particularly at the
client-level), you’ll be missing an important facet of business health.
// SoDA + Unanet, January 2020
Pipeline
Pipeline reports are one of the most commonly adopted tools among agency
management teams, but many are still tracked in Excel spreadsheets and lack
a “weighted and dated” view into pipeline activity over time.
// SoDA + Unanet, January 2020
Resource
Allocation
Less than half of respondents (43%)
said they had an integrated view into
resource allocation – an essential input
for managing headcount and project
scheduling decisions.
// SoDA + Unanet, January 2020
Capacity
Planning
Just 54% of respondents said they
tracked capacity plans… particularly
looking forward. It’s very challenging
to manage your headcount and
costs if you don’t know your existing
capacity relative to your booked and
forecasted workload.
// SoDA + Unanet, January 2020
Project Budget
Actual vs. %Complete
Just 63% of agencies track a Project % Complete
metric, and far fewer leverage it for visibility into
“earned value” and early project intervention.
2019 PERFORMANCE
Performance benchmarks for revenue growth, net
margin, average billing rates and more.
// More reports from SoDA @ www.sodareporton.com
// SoDA + Unanet, January 2020
Revenue Growth
Agency revenue grew in 2019 with a 75-point difference in growth rates between performers at the top/bottom 10%.
agency leaders reported that, in 2019,
the median revenue growth rate was at
12%… a respectable number but
certainly not a barn-burner of a year.
12%
median revenue growth
Average Revenue Growth in 2019
19%
All
69%
Top 10%
-6%
Bottom 10%
15%
Middle 80%
// SoDA + Unanet, January 2020
Profit Margins
Agencies operated at around 12% EBITDA profit margins in 2019 with a 31 point difference in margin performance
at the top and bottom 10% of respondents.
agency leaders reported that, in 2019,
the median ebitda profit margin was at
12%… a healthy margin in light of the
many competitive and cost-related
pressures faced in the industry.
12%
median profit margins
Average EBITDA Margins in 2019
13%
All
29%
Top 10%
-2%
Bottom 10%
13%
Middle 80%
// SoDA + Unanet, January 2020
Billing Rates
Agencies reported media billing rates at $150/hour with 58% stating that they had raised their rates in 2019.
Less than a quarter (24%) raised their rates by more than 10%.
agency leaders reported that, in 2019,
the median hourly billing rate was $150
(USD). 58% said they raised their rates
in 2019 with 24% increasing rates by
more than 10%.
$150
median hourly billing rate
Average Billing Rates in 2019
$171
All
$319
Top 10%
$100
Bottom 10%
$161
Middle 80%
// SoDA + Unanet, January 2020
Voluntary Employee Turnover
Agencies reported that voluntary employee turnover in 2019 was around 10%. Those with higher turnover
rates averaged around 36% and the lowest 10% of respondents saw almost no turnover.
agency leaders reported that, in 2019,
the median, voluntary employee
turnover was 10%.
10%
median employee turnover
Average Turnover in 2019
12%
All
36%
Top 10%
1%
Bottom 10%
11%
Middle 80%
// SoDA + Unanet, January 2020
Over Budget Projects
Over budget projects are a common occurrence in the agency world, but the majority of agency leaders say that
less than 15% of projects go over budget. Less than a quarter struggle with frequent and significant overages.
18% Less than 5% of projects go over budget.
Infrequently
56% Up to 15% of projects go over budget.
Occasionally
25% More than 15% of projects go over budget.
Frequently
41% Less than 10% over budget
46% Between 10-25% over budget
12% Between 25-50% over budget
02% Greater than 50% over budget
Frequency of Over Budget Projects Average Magnitude of Overage
PARTING
A few final thoughts on the study and what it means
for agency leaders.
// More reports from SoDA @ www.sodareporton.com
// SoDA + Unanet, January 2020
A Few Parting Thoughts
2020
Let’s be honest. 80% of agency leaders identify their organization as “data-
driven” and yet nearly 40% admit that they only track cursory level metrics and
tend to use data in a reactionary way.
1
3
Get Serious about Client Satisfaction. 64% of agency leaders say that they
track client satisfaction, but of those, almost a quarter use an informal method
bordering on gut feel. So that’s to say that just 50% really track client sat.
2
Transparent (Apparently). Despite a tendency to view their organizations as
transparent, just 64% report revenue to the entire agency and, from there, it’s
less than half who report on anything more meaningful.
// SoDA + Unanet, January 2020
A Few Parting Thoughts, Part 2
2020
Flying Blind on Sales/Marketing Performance. Most agencies have work to do
when it comes to understanding and quantifying their sales effectiveness – just
half (or less) measure Average Cost per Sale or Revenue by Lead Source.
4
6
Looking for More than Lip Service on Pay Equity and Diversity. These are
important issues in our industry, but you can’t manage what you don’t measure–
just 55% track diversity and 46% measure the gender pay gap in their agencies.
5
Benchmarking Utilization Can be Tricky. Utilization is a common metric, but it
can be misleading relative to performance. Almost 70% said they count time on
over-budget projects as billable and more than 50% count time on sales
proposals as billable… both distort “utilization” as a proxy for “chargeability.”
METHODOLOGY
Our approach to this study along with an overview of the
survey respondents and the metrics we explored.
// More reports from SoDA @ www.sodareporton.com
‣ Online survey of agency leaders fielded in October/November of 2019.
‣ The survey data includes a validated sample of 137 responses.
‣ The majority of responses (68%) came from small and mid-sized firms with less than $25MM in annual revenue.
‣ 88% of responses came from independent firms with 66% identifying as “completely independent with no
external investment” and another 12% reporting that they were “independent but with some external investment.”
‣ Firm types were mixed with 36% identifying as Digital Agencies and 30% as Consultancies. The remaining 44%
were a mixture of integrated agencies, design studios and production companies.
Survey Overview
The “Metrics That Matter for Agencies” Study is conducted by SoDA. This survey collects data on business
performance measurement programs, key operating metrics and performance benchmarks for digital agencies,
production companies and design studios. The 2020 study was fielded in conjunction with our friends at Unanet.
// SoDA + Unanet, January 2020
Respondent Overview (n=137)
50% SoDA Members
20% less than $5MM
Annual Revenue
31% between $5 – 10MM
17% between $10 – 25MM
11% between $25 – 50MM
22% greater than $50MM
66%
completely independent with
no external investment
Ownership
20%
independent but with some
external investment
08% owned by a holding company
06%
owned by another type of entity
(consultancy, private equity, etc.)
30% Consultancy
Agency Type
14% Integrated Agency
10% Production Company
05% Product/Service Design
05% Other
36% Digital Agency
88% Independent 36% Digital Agencies 68% Small & Mid-Sized
// SoDA + Unanet, January 2020
// SoDA + Unanet, January 2020
Operating/Finance Metrics
‣ Gross Margin
‣ Utilization
‣ Payment Velocity
‣ Cost of Goods Sold
‣ Revenue Per Billable Employee
‣ Average Billing Rate
‣ Average Effective/Realized Rate"
‣ Loaded Cost Per Billable Employee
‣ Available Capacity
‣ % Cost Contract/Freelance Labor
Project Metrics
‣ % Project Profitability
‣ Hours – Actual vs. Budgeted
‣ Avg. Billing Rates per Project
‣ % Project Gross Margin
‣ Project % Complete
‣ Project Burn Rate
‣ Duration – Planned vs. Actual
‣ Average Realized Rate per project
Sales/Account Metrics
‣ Sales Pipeline
‣ Forecasted Sales
‣ Average Win Rate
‣ Average Cost per Sale
‣ Average Sales Cycle
‣ Average Lag - Project Close to Start
‣ Client Satisfaction
‣ Revenue by Project Type
‣ Revenue by Client Type (New Client)
‣ Revenue by Client Type (Existing Client)
‣ Employee Performance
‣ Employee Satisfaction / Engagement
‣ Average Employee Tenure
‣ Voluntary Employee Turnover
‣ On-Boarding Interview Comments
‣ Exit Interview Comments
‣ Reasons for Employee Departures
‣ Employee Diversity
HR/Employee Metrics
‣ Revenue by Lead Source
‣ Revenue by Client Vertical
‣ Gender Pay Gap
‣ Professional Certifications
Metrics
Explored
In Study
`
SoDA is a global network of digital agency founders, creative innovators
and technology disruptors. With 100 agencies in more than 20 countries,
our members help the world's leading brands imagine and create the
future of digital experiences. Find us online at www.sodaspeaks.com.
Unanet supports over 2,000 professional services firms with  purpose-
built Project ERP, allowing customers to scale their businesses while
drastically reducing administrative costs and providing real-time insights
to make critical business decisions. Find us online at www.unanet.com.
Agency Measurement Benchmarking Study, January 2020
`
DIG
IT
AL

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SoDA :: Agency Measurement Benchmarking Study, 2019

  • 1. AGENCYmeasurement ‘20// SoDA + Unanet, January 2020
  • 2. Agency Measurement Practices Tom Beck Executive Director Chris Craig Board Member SoDA Webinar :: January 30, 2020
  • 3. AG EN CY METRICS T H A T M A T T E R SoDA recently partnered with Unanet to explore business performance measurement within agencies, production companies and design studios. We assessed the relative breadth, sophistication and transparency of measurement practices and compared several important benchmarks for 2019 performance. This presentation is a summary of what we found.
  • 4. Respondent Overview (n=137) 50% SoDA Members 20% less than $5MM Annual Revenue 31% between $5 – 10MM 17% between $10 – 25MM 11% between $25 – 50MM 22% greater than $50MM 66% completely independent with no external investment Ownership 20% independent but with some external investment 08% owned by a holding company 06% owned by another type of entity (consultancy, private equity, etc.) 30% Consultancy Agency Type 14% Integrated Agency 10% Production Company 05% Product/Service Design 05% Other 36% Digital Agency 88% Independent 36% Digital Agencies 68% Small & Mid-Sized // SoDA + Unanet, January 2020
  • 5. DATA PRACTICES Key findings from our online survey fielded with agency leaders in October-November of 2019. // More reports from SoDA @ www.sodareporton.com
  • 6. Becoming more “data-driven” is a common mantra across the marketing industry. A strong majority of agency leaders say they are data-driven, but the study results indicate at least some gap between intention and action. Data-driven or not? of agency leaders characterize their agencies as “data-driven” when it comes to managing the operations of their own business. 80% data-driven 17% We rigorously track and utilize a broad range of metrics to optimize near-term business performance and make anticipatory decisions against a longer-term forecast. Expert 46% We track a broad range of metrics to optimize near-term business performance but we tend to stay focused on what's right in front of us. Proficient 30% We track common financial and operational metrics but tend to utilize data in a more reactionary way. We know where we need to improve but have not yet invested. Competent 07% We track limited financial and project-related metrics. While we are beginning to develop our capabilities, we tend to be more focused on the delivery or work for our clients. Advanced Beginner / Novice // SoDA + Unanet, January 2020
  • 7. 61% of agencies report that they are transparent in sharing key operating and financial metrics with the entire organization. The remainder tend to keep performance numbers within the management team and/or owners. Transparency 14% We adhere to open book financial reporting for all employees to access. Extremely Transparent 47% We share a broad range of financial and operating metrics with the entire organization, including annual revenue and profit margin. Transparent 28% We share broad operating metrics with the entire organization but confine financial performance to the management team. Moderately Transparent 11% We share broad-based operating metrics with the management team but detailed financial performance is known only by founders/owners. Limited Transparency 1 Revenue (64%) Metrics Shared with the Entire Agency 2 Revenue Growth Rate (53%) 3 Client Satisfaction (51%) 4 Sales Pipeline/Forecast (48%) 5 Project Profitability (47%) 6 Utilization Rates (46%) 7 Profit Margin (46%) 8 Employee Satisfaction (45%) 9 Average Billing Rates (41%) 10 Employee Turnover Rate (23%) // SoDA + Unanet, January 2020
  • 8. When it comes to operational performance measurement, agency leaders point to data accuracy, action and access as the top pain points. Determining what to measure or communicating to the organization are lesser concerns. Barriers to better measurement // SoDA + Unanet, January 2020 Ranking the Biggest Data Challenges 40% Interpreting/understanding the data I have. 34% Getting the right data in a timely fashion or when I need it. 31% Determining which metrics are most important. 21% Disseminating the most relevant data to my organization 57% Getting accurate data. Accuracy 47% Acting on the data I have. Action 45% Getting the data I need. Access
  • 9. We explored agencies’ adoption of 41 metrics across four areas of the business– Finance/Operating Metrics, Project Metrics, Sales/Account Metrics and HR/Employee Metrics. While not intended to be exhaustive, the study provides a spectrum against which to compare the relative depth of agency measurement programs. A wide range of metrics Everything and Nothing Across the 41 metrics explored in this study, no single measure saw 100% adoption and, on the opposite end, every single metric was utilized by at least 38% of the respondents. This suggests that outside of the core metrics related to revenue, margin, utilization and sales pipeline, there is little common adoption of measures that might provide a fuller view into the overall health of the business, culture and client relationships. 87% Gross Margin 79% Cash Flow Forecast 78% Utilization Rates 77% Sales Pipeline Activity 77% Sales Forecast Top 5 Metrics Most Commonly Used* * For the purposes of this survey, we assumed that, at a minimum, everyone was tracking basic financial metrics such revenue, profit margin, cash balances, etc. As such, these were excluded from the “what are you measuring” questions. // SoDA + Unanet, January 2020
  • 10. We want to be measuring… Agency leaders point to a number of metrics they’d like to be measuring and tracking, but currently are not. Metrics related to sales and project-based measures are predominant in the Top 5 list. of agency leaders would like to be measuring the average time (in days) from when a project closes to when it actually starts… the highest unfulfilled need of the 41 metrics we explored. 38% average lag in project start date 1 Average lag from project close to start (38%) Average effective/realized rate per project (38%)2 New employee on-boarding input (37%)3 Average cost per sale (36%)4 Average sales cycle (35%)5 Top 5 Metrics Agencies Want to Be Tracking // SoDA + Unanet, January 2020
  • 11. KEY MEASURES The most- and least-adopted measures across four categories: Financial/Operating Metrics, Project Metrics, Sales/Account Metrics and HR/Employee Metrics. // More reports from SoDA @ www.sodareporton.com
  • 12. Finance / Operating Metrics The most and least commonly used operating metrics from our survey respondents (% who track). // SoDA + Unanet, January 2020 1 Gross Margin (87%) Cash Flow Forecast (79%)2 Utilization Rates (78%)3 Payment Velocity* (74%)4 Cost of Goods Sold (74%)5 Most Common Operating Metrics 1 % Cost of Contract/Freelance Labor* (46%) Capacity – Existing vs. Sold (54%)2 Loaded Cost Per Billable Employee (54%)3 Average Effective / Realized Rate (63%)4 Average Billing Rate (69%)5 Least Common Operating Metrics * Payment Velocity was defined as “the average time, in days, from invoice to payment received.” * % cost relative to loaded costs of billable FTE’s.
  • 13. Project Metrics The most and least commonly used project metrics from our survey respondents (% who track). // SoDA + Unanet, January 2020 1 Project Profitability (74%) Hours – Actual vs. Budgeted (74%)2 Avg. Billing Rates per Project (72%)3 Project Gross Margin (66%)4 Most Common Project Metrics 1 Average Realized Rate per Project (43%) Project Duration – Planned vs. Actual (47%)2 Project Budget Burn Rate (62%)3 Project % Complete (63%)4 Least Common Project Metrics
  • 14. Sales / Account Metrics The most and least commonly used sales and account metrics from our survey respondents (% who track). // SoDA + Unanet, January 2020 1 Sales Pipeline (77%) Sales Forecast (77%)2 Revenue by Project Type (67%)3 Average Win Rate (64%)4 Client Satisfaction (64%)5 Most Common Sales Metrics 1 Average lag from project close to start (38%) Average Sales Cycle (42%)2 Revenue by Client Vertical (43%)3 Average Cost per Sale (46%)4 Revenue by Lead Source (52%)5 Least Common Sales Metrics
  • 15. HR / Employee Metrics The most and least commonly used HR and employee metrics from our survey respondents (% who track). // SoDA + Unanet, January 2020 1 Employee Performance (75%) Avg. Employee Tenure (74%)2 Exit Interview Comments (70%)3 Annual Employee Turnover (69%)4 Reasons for Employee Departure (66%)5 Most Common HR Metrics 1 Employee Professional Certifications (45%) Gender Pay Gap (46%)2 Onboarding Interview Comments (54%)3 Employee Diversity (55%)4 Employee Satisfaction (63%)5 Least Common HR Metrics
  • 16. TRACKING Unanet takes a look at how to more easily track and report on some of the more important operating metrics. // More reports from SoDA @ www.sodareporton.com
  • 17. Utilization Utilization is one of the most commonly adopted metrics, but there is still some variation in how agencies define the % relative to variables such as PTO, time worked on sales proposals, time worked on over-budget projects and other factors. // SoDA + Unanet, January 2020
  • 18. // SoDA + Unanet, January 2020 Gross Margin 87% of respondents said they track gross margin at the aggregate level. Once you’ve got that under your belt, it’s important to dive more deeply and isolate gross margin performance by client, project or even individual.
  • 19. // SoDA + Unanet, January 2020 Gross vs. Net Margin Gross margin provides a critical view into performance, but unless you can contextualize it relative to net margin (particularly at the client-level), you’ll be missing an important facet of business health.
  • 20. // SoDA + Unanet, January 2020 Pipeline Pipeline reports are one of the most commonly adopted tools among agency management teams, but many are still tracked in Excel spreadsheets and lack a “weighted and dated” view into pipeline activity over time.
  • 21. // SoDA + Unanet, January 2020 Resource Allocation Less than half of respondents (43%) said they had an integrated view into resource allocation – an essential input for managing headcount and project scheduling decisions.
  • 22. // SoDA + Unanet, January 2020 Capacity Planning Just 54% of respondents said they tracked capacity plans… particularly looking forward. It’s very challenging to manage your headcount and costs if you don’t know your existing capacity relative to your booked and forecasted workload.
  • 23. // SoDA + Unanet, January 2020 Project Budget Actual vs. %Complete Just 63% of agencies track a Project % Complete metric, and far fewer leverage it for visibility into “earned value” and early project intervention.
  • 24. 2019 PERFORMANCE Performance benchmarks for revenue growth, net margin, average billing rates and more. // More reports from SoDA @ www.sodareporton.com
  • 25. // SoDA + Unanet, January 2020 Revenue Growth Agency revenue grew in 2019 with a 75-point difference in growth rates between performers at the top/bottom 10%. agency leaders reported that, in 2019, the median revenue growth rate was at 12%… a respectable number but certainly not a barn-burner of a year. 12% median revenue growth Average Revenue Growth in 2019 19% All 69% Top 10% -6% Bottom 10% 15% Middle 80%
  • 26. // SoDA + Unanet, January 2020 Profit Margins Agencies operated at around 12% EBITDA profit margins in 2019 with a 31 point difference in margin performance at the top and bottom 10% of respondents. agency leaders reported that, in 2019, the median ebitda profit margin was at 12%… a healthy margin in light of the many competitive and cost-related pressures faced in the industry. 12% median profit margins Average EBITDA Margins in 2019 13% All 29% Top 10% -2% Bottom 10% 13% Middle 80%
  • 27. // SoDA + Unanet, January 2020 Billing Rates Agencies reported media billing rates at $150/hour with 58% stating that they had raised their rates in 2019. Less than a quarter (24%) raised their rates by more than 10%. agency leaders reported that, in 2019, the median hourly billing rate was $150 (USD). 58% said they raised their rates in 2019 with 24% increasing rates by more than 10%. $150 median hourly billing rate Average Billing Rates in 2019 $171 All $319 Top 10% $100 Bottom 10% $161 Middle 80%
  • 28. // SoDA + Unanet, January 2020 Voluntary Employee Turnover Agencies reported that voluntary employee turnover in 2019 was around 10%. Those with higher turnover rates averaged around 36% and the lowest 10% of respondents saw almost no turnover. agency leaders reported that, in 2019, the median, voluntary employee turnover was 10%. 10% median employee turnover Average Turnover in 2019 12% All 36% Top 10% 1% Bottom 10% 11% Middle 80%
  • 29. // SoDA + Unanet, January 2020 Over Budget Projects Over budget projects are a common occurrence in the agency world, but the majority of agency leaders say that less than 15% of projects go over budget. Less than a quarter struggle with frequent and significant overages. 18% Less than 5% of projects go over budget. Infrequently 56% Up to 15% of projects go over budget. Occasionally 25% More than 15% of projects go over budget. Frequently 41% Less than 10% over budget 46% Between 10-25% over budget 12% Between 25-50% over budget 02% Greater than 50% over budget Frequency of Over Budget Projects Average Magnitude of Overage
  • 30. PARTING A few final thoughts on the study and what it means for agency leaders. // More reports from SoDA @ www.sodareporton.com
  • 31. // SoDA + Unanet, January 2020 A Few Parting Thoughts 2020 Let’s be honest. 80% of agency leaders identify their organization as “data- driven” and yet nearly 40% admit that they only track cursory level metrics and tend to use data in a reactionary way. 1 3 Get Serious about Client Satisfaction. 64% of agency leaders say that they track client satisfaction, but of those, almost a quarter use an informal method bordering on gut feel. So that’s to say that just 50% really track client sat. 2 Transparent (Apparently). Despite a tendency to view their organizations as transparent, just 64% report revenue to the entire agency and, from there, it’s less than half who report on anything more meaningful.
  • 32. // SoDA + Unanet, January 2020 A Few Parting Thoughts, Part 2 2020 Flying Blind on Sales/Marketing Performance. Most agencies have work to do when it comes to understanding and quantifying their sales effectiveness – just half (or less) measure Average Cost per Sale or Revenue by Lead Source. 4 6 Looking for More than Lip Service on Pay Equity and Diversity. These are important issues in our industry, but you can’t manage what you don’t measure– just 55% track diversity and 46% measure the gender pay gap in their agencies. 5 Benchmarking Utilization Can be Tricky. Utilization is a common metric, but it can be misleading relative to performance. Almost 70% said they count time on over-budget projects as billable and more than 50% count time on sales proposals as billable… both distort “utilization” as a proxy for “chargeability.”
  • 33. METHODOLOGY Our approach to this study along with an overview of the survey respondents and the metrics we explored. // More reports from SoDA @ www.sodareporton.com
  • 34. ‣ Online survey of agency leaders fielded in October/November of 2019. ‣ The survey data includes a validated sample of 137 responses. ‣ The majority of responses (68%) came from small and mid-sized firms with less than $25MM in annual revenue. ‣ 88% of responses came from independent firms with 66% identifying as “completely independent with no external investment” and another 12% reporting that they were “independent but with some external investment.” ‣ Firm types were mixed with 36% identifying as Digital Agencies and 30% as Consultancies. The remaining 44% were a mixture of integrated agencies, design studios and production companies. Survey Overview The “Metrics That Matter for Agencies” Study is conducted by SoDA. This survey collects data on business performance measurement programs, key operating metrics and performance benchmarks for digital agencies, production companies and design studios. The 2020 study was fielded in conjunction with our friends at Unanet. // SoDA + Unanet, January 2020
  • 35. Respondent Overview (n=137) 50% SoDA Members 20% less than $5MM Annual Revenue 31% between $5 – 10MM 17% between $10 – 25MM 11% between $25 – 50MM 22% greater than $50MM 66% completely independent with no external investment Ownership 20% independent but with some external investment 08% owned by a holding company 06% owned by another type of entity (consultancy, private equity, etc.) 30% Consultancy Agency Type 14% Integrated Agency 10% Production Company 05% Product/Service Design 05% Other 36% Digital Agency 88% Independent 36% Digital Agencies 68% Small & Mid-Sized // SoDA + Unanet, January 2020
  • 36. // SoDA + Unanet, January 2020 Operating/Finance Metrics ‣ Gross Margin ‣ Utilization ‣ Payment Velocity ‣ Cost of Goods Sold ‣ Revenue Per Billable Employee ‣ Average Billing Rate ‣ Average Effective/Realized Rate" ‣ Loaded Cost Per Billable Employee ‣ Available Capacity ‣ % Cost Contract/Freelance Labor Project Metrics ‣ % Project Profitability ‣ Hours – Actual vs. Budgeted ‣ Avg. Billing Rates per Project ‣ % Project Gross Margin ‣ Project % Complete ‣ Project Burn Rate ‣ Duration – Planned vs. Actual ‣ Average Realized Rate per project Sales/Account Metrics ‣ Sales Pipeline ‣ Forecasted Sales ‣ Average Win Rate ‣ Average Cost per Sale ‣ Average Sales Cycle ‣ Average Lag - Project Close to Start ‣ Client Satisfaction ‣ Revenue by Project Type ‣ Revenue by Client Type (New Client) ‣ Revenue by Client Type (Existing Client) ‣ Employee Performance ‣ Employee Satisfaction / Engagement ‣ Average Employee Tenure ‣ Voluntary Employee Turnover ‣ On-Boarding Interview Comments ‣ Exit Interview Comments ‣ Reasons for Employee Departures ‣ Employee Diversity HR/Employee Metrics ‣ Revenue by Lead Source ‣ Revenue by Client Vertical ‣ Gender Pay Gap ‣ Professional Certifications Metrics Explored In Study
  • 37. ` SoDA is a global network of digital agency founders, creative innovators and technology disruptors. With 100 agencies in more than 20 countries, our members help the world's leading brands imagine and create the future of digital experiences. Find us online at www.sodaspeaks.com. Unanet supports over 2,000 professional services firms with  purpose- built Project ERP, allowing customers to scale their businesses while drastically reducing administrative costs and providing real-time insights to make critical business decisions. Find us online at www.unanet.com. Agency Measurement Benchmarking Study, January 2020