Agency growth doesn’t exist in a vacuum. That is, it doesn’t just happen on its own. Several outside forces are all needed at once to give your agency the best chance of success. Often, agency owners and leaders know this, they just aren’t so sure on what all the factors are, and how they can make them work together effectively.
This blog is the third in a series about the four key pillars for agency growth. I’ve already covered a brief overview of the four, and the first pillar of good leadership. Next up is sound financial management.
Financial management is something many agency owners struggle with. After all, they tend to be creative types and don’t have as much passion for numbers. But, if that sounds like you, all hope is not lost. Once you know what you’re doing, implementing better financial management into your agency to aid your growth can be more straightforward than you think. Here are a few of my top pieces of advice and an explanation as to why financial management is one of the most crucial pillars for growth.
What does sound financial management for a creative agency look like?
It’s probably fairly obvious to you why financial management is needed for any business. Without keeping an eye on the numbers, any organisation is likely to run into trouble pretty quickly. But, there’s a difference between financial management and good financial management. You need effective financial management in your agency for several reasons, including the fact it provides you with the insights and data to:
- Make informed decisions. Do you ever feel that you have to make business decisions, but you don’t really know what the right decision is? Good financial management can help you with this. It’ll provide you with the hard facts and figures - in other words, the evidence and confidence to guide your decisions, from the small everyday ones, to larger decisions that will affect the whole agency.
- Allocate resources efficiently. It’s common for agency leaders to know that something isn’t right with their agency’s resource management, but not know quite what’s going wrong. Effective financial management will arm you with the knowledge of what money is being spent, where it’s being spent, what resources are operating efficiently, and which could be improved. From your internal team and freelancers to your technology and office spaces, financial management can provide the backbone for improving their efficiency.
- Maintain high levels of profitability as a whole. Of course, making informed decisions and better allocating resources are both major contributors to the improvement of profitability across the board. In essence, that’s what financial management is: looking at where you can save money and resources, improve efficiencies, and become more profitable.
How can I implement sound financial management into my agency?
Of course, all of this is easier said than done. That’s especially true for creative agency owners who likely aren’t particularly financially minded. Truly effective financial management does require a deep understanding of the unique economics of the industry, and the ability to navigate an often fluctuating cash flow. Nevertheless, by prioritising sound financial management practices, creative agencies can optimise their financial performance, attract new clients, and drive long-term growth.
Here are five of my top pieces of advice for improving financial management in your agency, and encouraging growth as a result.
Set clear financial goals
At the beginning of every financial year (or preferably, beforehand!), you should define your financial targets, revenue projections, and budget constraints. This will give you a clearer picture for the year ahead. And, it will ensure everyone is on the same page and working to the same objectives. Never underestimate the importance of cohesion across teams when it comes to agency growth! Having some clear targets to focus on also makes financial management easier to digest for everyone.
Track and analyse financial performance
This involves monitoring expenses, revenue, and profits regularly. Doing so will allow you to identify trends, opportunities, and potential risks. In other words, it will give you some clear data about your agency and its financial position. You can then use this data to make the type of informed decisions I mentioned above, and adjust your strategies as needed to ensure the business is staying on the right financial track throughout the year.
Optimise pricing and billing practices
I have mentioned this before, but it is so important for creative agencies to know what their services are truly worth, and charge clients appropriately for them. Offering packages or retainer-based services is another way to optimise your pricing and have a better idea of what cash is coming in and when. You should also ensure that accurate and timely billing is in place across the board to help maintain cash flow and profitability - key aspects for success when it comes to agency growth.
Manage cash flow effectively
Cash flow should also be carefully monitored. This means keeping a close eye on accounts receivable and payable, managing your debt effectively, and building up adequate cash reserves that will allow you to manage unexpected expenses or business downturns. A healthy cash flow is vital for any agency that wants to stay afloat, let alone grow.
Use technology and tools to streamline financial management
Automating financial processes wherever possible is a good idea. Not only does this save time, it also makes it simpler to understand and execute as a busy agency leader. For example, look into cloud-based accounting software and implement effective project management tools to improve efficiency and accuracy across the board, saving you time and money.
Overall, strong financial management is undeniably crucial for the continued success and growth of any creative agency. By putting it in place as one of the four key pillars, agencies have a far better chance of ensuring their current and future financial health and sustainability. Of course, it works best in tandem with all of the pillars, but even on its own is a key factor for the success of agencies of all sizes.
If you’re looking to take your agency to the next level, I can help by equipping you with a solid strategy based on your unique challenges. The first step is my free Scorecard, which will deliver personalised recommendations on how to improve your agency’s growth. To take the five minute Scorecard, please click here.
