You’re working hard to get your inbound marketing agency all squared away. You’re tweaking your sales process, you’re hiring new people, you’re adjusting your tactics and now you're seeing clients get better results.
You’re tight with a handful of other agency owners and you talk from time to time about how you’re doing. This is great but be careful about the advice you get from other agencies and be even more careful about comparing your inbound agency numbers to their numbers.
Inbound agencies are like people. They’re all different. Some agency owners are running lifestyle businesses, others are trying to grow aggressively, while still others are just trying to get by. When you compare notes and inbound marketing agency numbers you have to keep that in mind.
For instance, if you’re actively and aggressively growing a business you might have strategically decided to limit the profit and invest heavily in people. If you’re running a lifestyle business then you’re probably running a lot of costs through the business which makes some of the numbers look more depressed than they might actually be in reality. This simple difference in business strategy makes comparing two sets of numbers for two similar companies challenging.
Impact of Freelancers on Numbers
Here is a great example. One of the numbers that we track is average revenue per employee. Most inbound agencies run around $100,000 per employee. Running a $3.5 million inbound shop, you probably have about 35 team members or FTEs. But if you like outsourcing stuff to freelancers, then you would have a lot less team members and your average revenue per employee would be much higher. This might look good on paper but your cost of goods sold would be higher because you have to pay all those freelancers.
I actually know a very successful inbound agency who has only one or two team members and they do about $1.5 million in annual revenue. They do this by outsourcing and freelancing everything. His focus is taking vacation and being home for his kids. This is a great example of how a savvy entrepreneur matches his personal goals with his business strategy. But if you ask him for his revenue per employee number without understanding the rest of the story—you might leave the conversation feeling dejected because your numbers don’t jive with his.
Inbound vs. Traditional Agencies
I hear a lot of traditional agency experts talking about $200,000 in monthly revenue per employee. This makes sense if your selling media and making a commission on all the media you buy for clients. This is one way to drive up revenue without needing corresponding team members. However most inbound agencies don’t have a media commission component to their business. Another reason to make sure you know the context of the conversations or advice you’re getting from other agency experts.
There are many more traditional agency consultants out there than consultants who specialize in working with inbound agencies. I know because I’ve had a few of these consultants in my office, looking at what we do, and hoping they would find something that would add value. I literally had one of these highly recommended industry agency experts tell me, “There’s nothing I could suggest that you’re not already doing.”
It’s not that we’re so smart, it’s that he didn’t understand how an inbound agency runs, how it’s staffed, how it makes money and how it gets optimized to increase the numbers. Until inbound marketing becomes more mainstream and there is more inbound agency data available for benchmarking, using agency expert data to drive your decisions is going to be challenging.
The Inbound Agency Learning Curve
As you make your way around the community of inbound agencies, you’re going to find one common characteristic, no one has been doing this for very long. This means the people you’re talking to are likely working hard to figure things out—just like you.
So when they tell you what they’re doing or share their numbers, keep their experience in context. I’m not diminishing the value here, just asking you to take their situation into consideration. It’s very likely that their program is still in the early stages and they’re still learning what it takes to get clients results.
Honestly, because every agency is a little different and every agency owner has put their personal spin on most of what they do, your best bet is to take all this data into consideration and then do what you think is right and what works for your agency.
I’ll go one step farther and encourage you to do what others are NOT doing. If they’re no one smarter than you and if other owners don’t have more experience than you, your ideas are likely just as valid and just as likely to succeed as anything they’re currently doing.
Trust your own opinion, trust your own eyes, and trust your past experiences. Over time you’ll start to see, first-hand what numbers work for you, what numbers you like tracking and what important numbers predict client program performance and financial success for your agency.
Start Today Tip – Today your goal should be to pick your numbers. What are the five most important numbers for your agency? These might change month to month, but for now pick them and stick with them for at least three months. Track them weekly and compare them to other agencies, but keep the context of that comparison in mind as you’re looking at numbers agency to agency. Don’t make any snap decisions simply because you hear something another agency is allegedly doing. Instead do what you think is right for your agency and your team, just be agile enough to pivot if your numbers tell you a different story down the road.
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