This document outlines key measures of profitability that research and insight businesses should track, including operating profit as a percentage of gross revenue, revenue per head, net revenue to salary ratio, and operating profit per head. It recommends targets for each metric to aim for in order to improve profitability. The three most effective means of improving profitability without growing revenue are accurately costing projects, reviewing charge-out rates and staff utilization, and increasing gross margins by reducing costs and finding incremental revenue sources. The document provides case studies of three companies that implemented these strategies, improving earnings before interest and taxes by £100,000, from a loss of £800,000 to break-even, and growth from 9% to 15% operating profit

1. How to increase the profitability of research
and insight businesses
WIN/Gallup Conference
Dublin
27th May 2015

2. Our qualifications
• Background in strategy and marketing, with MBA
• 14 years in research
– Systemic analysis of profitability across globe
– Turn-around of poor performing divisions
– UK lead for European change programme to improve profit and
revenue growth
– Commercial Director for medium-sized agency
• Founder of Client Advocates
– We help research agencies to be grow more quickly and be more
profitable

3. What measures of profitability should you track?
• Operating Profit as a % of gross revenue
• Revenue per head
• Net revenue to salary
• Operating profit per head

4. What should you aim for?
• Operating Profit as a % of gross revenue
– Above 10%
• Revenue per head
– £80k per head. Above £100k is very good
• Net revenue to salary
– Below 50%. Below 40% is excellent
• Operating profit per head
– £10k per head is good

5. The three most effective means of improving
profitability (excluding growing the top line)
1. Cost accurately – including a provision for researcher time,
and then review costs on live projects
2. Review charge-out rates and utilisation levels – and set
targets or aspirations
3. Increase gross margin (contribution) by reducing project
costs and securing incremental revenues

6. Case Study 1 – mid-sized ad hoc agency
• Turnover approx. £5m
• EBIT approx. 4% or £200,000
• Implemented:
– New costing sheet where full costs, including researcher time were included –
this then suggested a price to client
– Charge-out rate review and introduced more accurate assumptions around
utilisation (
– Renegotiation of main supplier relationships
– Where commercially acceptable, charged clients for additional work and
analysis
• Outcome was £100,000 improvement on EBIT within 12 months (with no
increase in turnover)

7. Case Study 2 – large research division with a number
of large tracking studies
• Turnover approx. £10m
• EBIT -£800,000
• Implemented:
– Monthly cost monitoring on all major programmes
– Review of utilisation and setting of targets for all senior staff
– Outsourcing of project management to third party supplier
– Focus on securing incremental margin rich additional analysis
– Reduced salary to gross margin ratio
• Outcome was a return break-even within 12 months and grew revenues by
10%

8. Case Study 3 – small niche agency
• Turnover approx. £1m
• EBIT approx. 9% or £90,000
• Cashflow very variable
• Implemented:
– Review of costing and pricing, identifying opportunity to increase project
profitability
– A new syndicated product with very strong margins, increasing revenues and
margin
– Refined supplier relationships (accountancy, IT, HR) to reduce costs and
improve quality of provision
– Cash-flow management (invoicing, bad-debt chasing) and improved banking
relationship
• Outcome was a growth in the revenues of £200,000, improved cash
position and an EBIT of 15% (£180,000)

9. In Summary
1. Cost accurately and price accordingly
2. Review charge-out rates and utilisation
3. Increase gross margin (contribution)

10. Questions?

11. For further discussion and exploration:
Paul Griffiths
+44 7711344074
paul@clientadvocates.co.uk
www.clientadvocates.co.uk
@clientadvocates