20 Jun What the creative services industry needs from their bookkeepers
At Reconciled Solutions, one of the niche industries that we love to work with is the Creative Services Industry. I recently had the opportunity to attend (and sponsor a breakfast for) the Build A Better Agency Summit (BABA), held in Chicago and run by the Agency Management Institute. I met some fun go-getters! They offered me some valuable insight into what the creative services industry needs from their bookkeepers, and how we can better serve the agency market.
Here’s what I learned.
Many agencies are updating budgets and forecasts on a quarterly basis – and during the pandemic, many were reviewing them MONTHLY. Therefore, it’s crucial for them to have good financials on a timely basis. (Hello! You’re singing my tune!)
Most agencies strive to have their budget for the next year prepared by Dec. 1, and it’s important that it includes a forecast of the following 4 items:
- Total Revenue
- Total Profit
- Cash on Hand
- How much you need in your rainy day fund
Scope creep, scope creep, scope creep! It’s hard to keep your staff from overdelivering on their commitments, which results in unprofitable projects.
Most agency owners I spoke with thought Harvest was a great software for running their agency and managing time spent by the staff. Good time reporting is crucial!
The annual agency survey
Bair Media Group conducts an annual survey of agencies. Here are this year’s results of “When and Why do Clients Decide to Spend More with their Agencies”?
There are 3 types of clients.
Staff Prioritizers (43%)
These clients want a tight collaboration between the agency and themselves. They value niche-specific expertise, and they wish their agencies would spend more time getting to know their team. They like to switch to new agencies because they are looking for a fresh approach. Clients in this group are likely to have budgets to spend on agencies over $250K.
Relationship Builders (30%)
These clients want a monogamous agency and are willing to give credit to the agency when things go well. They are most open to collaborate with the agency on new products and services.
Savings Seekers (27%)
These clients are always looking to spend less, and are willing to handle marketing in-house if necessary. The majority of them (53%) work with more than one agency and are typically under $1 Million in annual revenue.
The good news for agencies is:
- 43% of AD AGENCY clients say they would like to do more work with their chosen agency
- 81% want stronger and longer agency/client relationships
- 79% believe collaboration with an ad agency leads to better outcomes for their business
- 72% trust the agency recommendations
- 59% are interested in new services from agencies
- 59% of clients have increased the budget reserved for the agency mid-year. They increase the budget because they want more funding for successful activities, or because of a new product or offer they could not pass up.
The factors that positively affect their opinion of the agency:
- The agency delivers sooner than projected
- Owner meetings are held to understand potential improvements in their campaigns
- The client is given given documentation that outlines what to expect from the agency
- The agency shares their project goals with the client
- Performance reports from campaigns are provided monthly
- They don’t like agencies to pitch new services at social events
That’s lots of good data for you agencies to review!
The importance of accurate bookkeeping for your agency
Accurate bookkeeping will help your agency measure your Key Performance Indicators. Additionally, it allows you to pinpoint where your agency is making money vs. where it’s losing money. Is your Chart of Accounts set up properly?
Creative Services firms need to see their silos of income and expense with absolute clarity. Is there a revenue pricing issue? Are you overdelivering to the client? Are there too many one-off projects, which make it hard for you to scale up? Are you measuring utilization of employees? Is the revenue your staff is generating at least 3.5 times what you are paying them?
Metric-driven tasks that result in clear financial storytelling will help your staff know if they are doing well on their project.
These issues are not unique to the Creative Services industry. We get it. You are good at what you do, but “the numbers thing” doesn’t come easy or make sense to you. That’s where we come in! Because guess what: we LOVE those “boring” numbers! Our bookkeeping and Profit First advisory services can give you the clarity you need.
If you have questions about your books, reach out to us today. We’d love to help.