Key performance indicators (KPIs) are relevant metrics that align with your agency's future goals. Tracking KPIs will allow you to measure your marketing agency's success over time. It is essential to track these performance indicators because they will help you determine your business's current state and direction.
KPIs are defined by goals for your future projects or campaigns, and based on this information, you can focus on the metrics that are relevant to your agency. You can also identify other metrics to help you reach specific goals or improve and develop your overall business.
Some of the most important KPIs to track your marketing agency’s growth are:
1. Monthly Recurring Revenue Calculator
If your agency charges clients a retainer fee, that is monthly recurring revenue (MRR), which is predictable and ongoing.
It is important to track because it is a good indication of your agency’s overall profitability and monthly cash flow. You’ll want to acquire more clients with bigger deal sizes to improve upon this figure.
2. Customer Retention Rate Calculator
Customer retention rate measures how well your business retains its customers.
This is important because retaining a customer is usually cheaper than acquiring a new one. A low retention rate means your agency’s services do not meet your clients' needs or expectations. To improve this rate, look at methods to build loyalty with your clients and develop programs that will entice them to continue using your services well into the future.
3. Churn Rate Calculator
Measuring churn rate will determine how many customers you have lost over a certain period of time.
This is important because it can help you determine strategies to increase customer retention. You can decrease your churn rate by looking into why your clients are leaving and finding different methods to entice them to stay.
4. AR Turnover Ratio Calculator
Accounts receivable turnover measures how effectively your agency converts your accounts receivables into cash. If your agency is unable to collect payments on time, your cash flow will be impacted, affecting your ability to meet payroll and other obligations.
A higher AR turnover ratio means that your agency efficiently collects payments due. A lower AR turnover ratio indicates that your agency has inefficient collections, poor credit policies, or clients who are not creditworthy. To improve your AR turnover ratio, you can send out payment reminders, follow up on accounts receivables frequently, or use automated debit to receive payments more promptly.
5. Days Sales Outstanding (DSO) Calculator
Your Days Sales Outstanding will show the average number of days your marketing agency takes to receive payment for a sale.
The higher the DSO, the longer it takes your company to receive compensation, negatively affecting your cash flow. To improve your day's sales outstanding, you should look into ways to make your account receivables process more efficient.
6. Operating Cash Flow Calculator
This KPI measures the amount of money generated by your business on a daily basis.
This metric is important because it shows how stable and healthy your business is and how well it is growing. You can improve your operating cash flow by reducing your expenses and overhead costs and increasing your revenue or improving your collections.
7. Net Profit/Net Margin Calculator
Your net profit is the remaining revenue after subtracting your operating costs and expenses. If this number is lower than you would like, try reducing your costs as much as possible or finding different ways to increase your revenue.
Calculating your net margin will determine how much profit your agency has generated as a percentage of your total revenue. This may give you a better idea of how well your business is performing.
8. Customer Acquisition Cost (CAC) Calculator
Your Customer Acquisition Cost is important because it measures how much it costs your agency to obtain one new client. Your CAC is crucial to analyzing your marketing return on investment.
Ideally, you want to use the most cost-effective way to acquire new clients. A lower CAC is better as that means you are more efficient in acquiring new clients, and your business should see higher profits as a result. You can reduce your CAC by creating more powerful marketing strategies and reducing unnecessary marketing expenses.
9. Customer LTV Calculator
Customer Lifetime Value looks at the average amount a customer spends on your products or services over their entire relationship. There are many ways to calculate your Customer Lifetime Value, but this formula is a simple way to measure it.
Your Customer LTV is an important metric because it usually costs less to retain a customer than to acquire a new one. Therefore, increasing the LTV of your existing customers is a great way to grow your business. Knowing what this value is can help you find ways to increase customer retention and create more loyalty among your clients.
10. Return on Investment (ROI) Calculator
Calculating ROI is vital to determine how profitable each marketing campaign was for your business. Knowing this figure can allow you to be more profitable in the future, ensure your team is working efficiently and will enable you to find methods to improve your advertising efforts.
By monitoring these eleven key performance indicators, you will see where your business is succeeding and where there is room for improvement. You will be better able to reach your goals and devise sound strategic plans for the future.
You need accurate bookkeeping to be able to measure your KPIs. At Enkel, we can provide your marketing agency with the reliable bookkeeping it needs to track its growth metrics. Contact us today to learn how we can help you keep your books in order.
