Episode Details

What key metrics are you tracking for your agency? Do you know which KPIs are crucial for making proactive decisions to benefit your agency? There are 4 key metrics that enable you to see into your agency's future and make smarter growth decisions. Today's guest runs a CPA advisory firm that provides agencies with the tools they need to come up with original solutions for their unique challenges. He shares the four key metrics every agency should be tracking to predict their future moves.

Jody Grunden is the founder of Anders CPAs + Advisors, a virtual CFO group focused on the creative agency space. His team serves as a catalyst for those striving to achieve their highest potential and carry this mentality on to their clients and community.

In this episode, we'll discuss:

• Crucial metrics to track for your agency.
• The target average utilization rate for agencies.
• Assessing profitability and gross margin to make adjustments to your prices or staff.

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Sponsors and Resources

Dot & Co: Today's episode of the Smart Agency Masterclass is sponsored by Dot & Co, client management specialists that will help digital marketing agencies keep their clients happy. With the help of their knowledgeable account managers, agency owners can step away from the day-to-day and focus on driving results. Check out dotandcompany.co/smartagency and get 20% off your first month working with them.

The 4 Crucial Financial Metrics You Should Be Tracking for Your Agency

Jody and his team help their clients focus on their goals and achieve their highest potential. They help improve their client's business by teaching them to focus on four main metrics:

1. Cash metrics
2. Production metrics
3. Financial metrics
4. Pipeline metrics

Keeping track of these metrics makes a huge impact on your agency allowing you to predict your cash position every month and make key decisions ahead of time rather than being reactionary.

1. Cash Metrics

This is annualized revenue; something all agency owners should have knowledge and control over. Keeping track of how much cash you have in the bank determines your next steps in the business.

The goal is to have at least 10% of your annualized revenue in the bank at all times. So if you have a $3 million agency, you should have $300,000 in the bank. Why ten percent? This amount covers 2 months' worth of expenses for a service-based business. Of course, this is the minimum. It's better to strive for 30% or six months' worth of expenses.

There's no right or wrong answer. Some agencies are fine with 4 months' worth of expenses in the bank, some need less. How do you decide on the percentage your agency requires? Just look at your different risk factors. Are you focusing most of your resources on just one client? Do you have older, retiring partners? In those cases, there is high risk and you need a higher percentage. Do you have high recurring revenue? If so then 10% is fine. Anything over 6 months might be overkill and money you could be using to reinvest in the agency.

Why You'll Need at Least Three Different Bank Accounts

Jody usually advises clients to have three differen