January often has that sense of a fresh start and a new beginning, it is the perfect time to take a step back, review the year just past and evaluate your agency’s financial health. Reviewing the past year isn’t just about closing the books, it’s about taking an opportunity to reflect on what’s worked, identify challenges and set the stage for the growth you want to achieve in the year ahead. Carrying out a review is more than best practice, it’s a hallmark of good financial rigor. It helps you understand how agile you are as an agency and defines your ability to grow. It can also be a useful exercise to identify areas for improvement. By focusing on measurable insights, you can unlock new opportunities, improve efficiency, and confidently plan your next move. In our latest blog, wanted to share some things to consider as part of your review.
1. Assess your financial stability
As with any project, it is good to start at the beginning. With your financial review some key numbers that you want to get an understanding of are:
- Cash flow management: Did your cash flow meet your expectations in 2024 or were there significant fluctuations? Compare your cash inflows and outflows to spot trends to create insight, actions and learning.
- Profit margins: Review your gross and operating profit margins. Are they aligned with your initial goals (budget) and industry benchmarks?
- Debtors and creditors: Evaluate accounts receivable and payable. How efficient were you in collecting payments and managing debts? Ensuring that your invoices are paid promptly is such an important part of any business, if this is not working, then this should be a priority action. Our article “10 strategies to encourage prompt payment and improve cash flow” may help.
Quick Tip: Create a month-by-month cash flow chart to review patterns and identify any recurring issues.
2. Analyse your KPIs
Once you have completed step one above it is important to then look beyond the surface and dig deeper, consider:
- True operating profit: Are you accurately tracking your profit margins, and how do they compare to industry standards? Do you recognise your revenue correctly? Are there any changes you need to make in your processes and/ or reporting to ensure accuracy of your numbers?
- Staff Cost Ratio: How much of your revenue is allocated to staff costs? Ratios above 60% may signal inefficiencies. Thinking about creating an agile workforce with a blend of permanent staff and freelancers will enable you to flex in response to changing client demands.
- Team utilisation: How effectively are your team members’ billable hours utilised? Does your team track time and do you use a project management platform to have this insight available when needed?
Quick Tip: Create a performance dashboard to track KPIs consistently, so you’re not scrambling for insights at year-end.
3. Review your revenue streams
A critical part of your client retention approach is understanding the different revenue streams between existing and new clients. Once you have clarity on this, it is also then wise to split this down further by project type and understand which is more profitable for the agency. Ask yourself:
- What percentage of your revenue came from upselling or expanding existing accounts?
- How much of your total revenue was driven by new client acquisition?
Quick Tip: Answering these questions helps pinpoint what’s driving growth and where to focus this year’s efforts.
4. Evaluate your financial processes
As part of your review, one of the key things to consider is, do your financial systems effectively support your operations? To help you answer this, you might consider:
- Automation tools: What tools do you use? Tools like, Xero or QuickBooks can easily help to streamline bookkeeping and reporting functions.
- Budgeting and forecasting process: Were your forecasts accurate, or do you need to adjust how you plan?
- Team accountability: Did you involve your team in financial forecasting and reporting for greater accuracy and shared ownership? When agency owners are looking for growth, giving their teams accountability of their budgets can make a significant difference. Not only will this approach help to save the agency money but also have a great impact on team engagement. Each profit and loss line item in your accounts should have an owner and this process involves every employee in the financial success of the agency.
Quick Tip: Schedule a systems audit early in the new year to address gaps proactively.
5. Celebrate the wins and acknowledge the challenges
Celebrating the achievements of your team is really important. With clear KPIs in place, it will be easy to track:
- Increased profitability of clients, projects or teams.
- How many new clients a particular team have won.
- How many clients have been lost.
- How many new projects from existing clients the teams have won.
- Cash flow for each team and project.
Quick Tip: Acknowledge your team’s contributions with an end-of-year appreciation to foster morale and alignment.
6. Plan for the future
Financial planning and setting a clear roadmap for the year ahead is critical for good financial health. By taking some time to understand what you wish to achieve, identify any areas in processes and where there may be dips in demand will be critical to good financial health as we head into 2025. Things you may wish to consider:
- Financial goals: It is important to start the year by defining your SMART business goals. So whether you wish to increase revenue, review your operating processes, stabilise your cash flow or plan for exit/ acquisition, being clear on what you want is critical.
- Investment opportunities: As part of the business review, identify areas for focus and investment eg: new technology, identifying skills gaps and recruiting the right talent or introducing a new product or service to drive growth.
- Contingency planning: There is always seasonality within a business, so understanding and preparing for those down times is key, to ensure you can maintain your marketing approach and retain your staff. Creating a buffer against uncertain times will be useful to help you feel comfortable with your finances. We generally suggest that you have 3-months of operating expenses as a cash flow buffer.
- Future Trends: Think about the changing landscape of the marketing agency landscape, with advancing technology, AI, changing client buying behaviours and the rising importance of the environment things will continue to evolve in 2025. To read more on this, check out our article “key 2025 Trends for Marketing Agencies“.
Someone said once that “A superstar isn’t 100 times better than everyone else, they’re 2% or 3% better”. Small incremental improvements over time is all you have to aim for, which can lead to massive transformations over time.
Quick Tip: Schedule a strategy session early in the year to align your goals with actionable steps.
In summary
There are lots of changes on the horizon for 2025. Taking time to complete an end of year financial review and forward planning session is more than a nice to have, it is the foundation for good financial health and a productive, profitable year ahead for your agency. Remember, whatever numbers you uncover, it forms part of the benchmark to enable you to move forward, view it as an opportunity for agency growth. They can help to show you the path forward.
Use your insights to set short-term, mid-term and long-term goals that build momentum and drive sustained growth. Whether this year’s review was thrilling, disappointing, or somewhere in between, embrace it as a tool for progress. If you are ready to turn your financial insights into a solid growth plan? Get in touch with CFO for Growth to see how we can support you in working through your end of year financial review, achieving financial clarity and confidence for the year ahead.
