STANDSTILL agencies focus on the TOP LINE
STANDOUT agencies focus on the BOTTOM LINE
STANDSTILL agency owners have probably heard the old adage “turnover is vanity, profit is sanity, cashflow is king”. Yet they still seem obsessed with chasing top line turnover more than anything else.
To be fair, it’s healthy to have one eye on a revenue target. It promotes growth and is something you can more openly talk about with colleagues, clients and even competitors if you wish.
Worryingly though, I see so many agencies claiming impressive turnover figures when their underlying bottom line profitability is poor (and in some cases non-existent).
STANDOUT agencies focus on the bottom line (even when they’re investing to stimulate growth). They’d rather be an £800k agency making 20% net profit than a £1M agency making 5%. The difference here is not just £100k, it can be the difference between life and death.
If you’re not making at least 15%, you’re really running the agency dangerously close to the edge. You’re not profitable enough to build up cash reserves and/or ride out some client losses or bumps in the road.
STANDSTILL agencies are driven by revenue. STANDOUT agencies are driven by profit.