Most agency owners know their revenue figures. Fewer can tell you their profit margin. Almost none can explain how their cash position links to hiring, client concentration, or Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). The issue is that too many agencies chase revenue as if it’s the only metric that matters. Winning bigger projects or hitting that next turnover milestone feels exciting, but revenue alone doesn’t create a sustainable business that is efficient, profitable, or ready to sell.
A lot of agencies come to us because they simply don’t have clarity on how their business is performing. They know they’re busy. They know clients are paying. But they don’t know if they’re actually making money, or whether it’s leaking away. That’s why we insist on tracking the right KPIs. Done properly, these metrics give founders the insight to make better decisions, not just about profit, but about their lifestyle, their team and the kind of business they want to build.
Why agencies get KPIs wrong
It’s not that agency founders don’t care about numbers. It’s that most reporting is too shallow, too late or too generic.
- Accountants report backwards. You get a set of historic accounts, usually three months late, which tell you nothing useful about today’s challenges.
- Bookkeepers focus on transactions. Necessary, but not enough. You need interpretation, not just record-keeping.
- Dashboards overwhelm. Many agencies set up tools with 30+ agency metrics, but none are prioritised, explained or linked to decisions.
As a result, owners default to revenue because it’s simple and visible. But chasing revenue without understanding profit, cash and productivity is what traps agencies in the “busy but broke” cycle.
Our view: focus on agency metrics that matter
We strip it back to a handful of KPIs every agency founder should know, regularly track and review. They’re not vanity numbers. They’re the levers that directly drive profit, cash and ultimately, the value of your agency.
1. Gross Profit (the right way)
Most agencies calculate gross profit as revenue minus delivery costs like freelancers and media spend. That’s fine, but incomplete. We take it further. We include direct labour cost (the salaries of client-facing staff) in gross profit. This is because in agencies, people are your cost of delivery.
If you ignore those costs, you’ll think your margins are stronger than they really are, but once you include them, you see the true efficiency of your delivery model. As a benchmark for healthy agencies, gross profit (after direct labour) should be around 50–60%. Lower than that and you’re probably overservicing, under-pricing, or carrying too many delivery staff.
2. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is the clearest measure of how profitable your agency really is. Why it matters:
- It strips out noise and shows the true operating performance.
- Buyers and investors use it to value your business.
- It highlights whether you’re building something sustainable or just covering costs.
As a benchmark we want to see EBITDA margins of 15–25% in well-run agencies. If you’re under 10%, it’s a red flag, either costs are too high or pricing and recovery aren’t tight enough.
3. Team Utilisation
Agencies sell time. If you’re not measuring how much of your team’s time is billable, you’re flying blind.
- Utilisation = billable hours ÷ total available hours.
- Too low, means underused staff are dragging margins down.
- Too high, means overwork, burnout and unhappy clients.
As a benchmark, for delivery staff, aim for 70–80% billable utilisation. For senior roles, it should be lower because they spend more time on management and growth. When we onboard clients, we often see utilisation at 50–60% because time tracking is inconsistent, or projects are badly scoped. Fixing this is often the fastest way to improve profit.
4. Client Profitability
Not all clients are equal. Some deliver healthy margins. Others drain resources and create hidden losses.
Tracking client profitability means comparing the revenue from each client against the actual time and costs of servicing them. It’s the only way to know which accounts are helping you to grow and which are holding you back.
Often, 20% of clients deliver 80% of profit. The rest either break even or erode margin through overservicing. With clear client profitability analysis, agency owners can see which accounts to grow, which need re-pricing, and which should be let go.
5. Client Concentration
It’s not just about how profitable your clients are, it’s about how risky your revenue mix is. If one client accounts for more than 20–25% of your total revenue, your agency is vulnerable. If they leave, it can wipe out months of profit and force emergency layoffs.
Tracking client concentration means looking at your top 5-10 clients as a percentage of revenue and having a plan to diversify. Agencies that ignore this end up hostage to one or two big accounts. Agencies that pay attention to this KPI can grow steadily and with less stress.
6. Current Ratio & Cash Cover
Revenue and profit matter, but they don’t tell you if you can pay your bills.
- Current Ratio = current assets ÷ current liabilities. This shows whether you have enough short-term assets (like cash and receivables) to cover short-term obligations (like payables and tax). A healthy ratio is above 1.2 (achieving min 2 is ideal). Below 1 and you’re at risk of not meeting obligations.
- Cash Cover = how many months of overheads you can pay with the cash you have in the bank. Aim for 2–3 months’ to create a buffer against delays or downturns.
Too many agencies operate with less than 1 month’s cover which means that one delayed payment from a client can trigger a crisis.
Why these KPIs matter beyond numbers
These agency metrics are not abstract accounting concepts, they translate directly into what matters most to agency founders:
- Gross Profit, EBITDA and Cash metrics determine profit and cash, which in turn drive how much you can take home.
- Utilisation and Client Profitability show whether your team’s time is well spent, and whether you’re working with the right clients.
- Client Concentration affects how stable and resilient your agency really is.
Managing these KPIs well translates directly into:
- How much profit you keep.
- How much cash you can rely on.
- How much you can take home.
- How much free time you have, because you’re not constantly firefighting or chasing debt.
Our approach
We make these KPIs simple and actionable. Our team builds dashboards that show agency leaders not just where they stand today, but also the trends and forward view. That means you can see utilisation improving, client concentration risk falling, or cash cover building up and you can use that insight to make decisions with confidence.
It’s not just about measuring; it’s about using your agency metrics as tools to run a better agency and make better decisions. Finance doesn’t need to be complicated, but it does need to be clear. By focusing on the KPIs that matter, you can take control of profit, cash, and growth to build an agency that’s not just busy, but truly valuable.
If you’d like to see how we can help you track and improve your agency metrics, get in touch to book a no-obligation discovery call with our team.
