10 Metrics & KPIs That Every Agency Should Track - AgencyAnalytics (2024)

Running an agency involves wearing a lot of hats—from sending client proposals, managing client campaigns, reporting on the results…the list goes on.

While the importance of reporting on your client’s results can’t be understated, an equally critical component of running a successful agency is meticulously tracking your own internal metrics and KPIs.

Tracking your agency's KPIs allows you to stay up-to-date on client satisfaction, ensures you’re on top of finances, and keeps your team accountable for its sales and marketing efforts.

Having an accurate idea of your own metrics and KPIs also allows you to set goals and know exactly what you need to do to get there—for example, how many qualified leads you need to send your sales team each month to hit your revenue targets.

In this article, we asked several marketing agencies to share their most important metrics and KPIs to ensure the profitability and growth of their agency—ranging from sales, marketing, finances, pricing, and customer success. In particular, the 10 KPIs we'll discuss include:

  • Qualified Leads: MQLs and SQLs

  • Customer Acquisition Cost (CAC)

  • Customer Lifetime Value (CLV)

  • Proposals Sent

  • Win Rate

  • Net Margin

  • Cash Flow from Operations

  • Agency Utilization Rate

  • Client Retention Rate

  • Average Churn Rate

Let's get started.

Sales & Marketing KPIs

Starting at the top of the funnel, knowing these metrics and KPIs allow you to set sales targets, forecast revenue, and budget for marketing expenses.

1. Qualified Leads: MQLs and SQLs

Without enough qualified leads to hand over to your sales team each month, growing an agency and maintaining profitability will always be a struggle.

A marketing qualified lead, or MQL, is defined as a lead that has expressed interest in your agency and has the potential to become a customer with the right nurturing, for example with content, case studies, and testimonials. An MQL becomes a sales qualified lead (SQL) after they’ve been nurtured by the marketing team and are ready to talk to sales.

There are a number of ways to automatically track MQLs and SQLs, for example using lead scoring based on company information, online behavior, email engagement, and so on.

The CEO ofHook Agency, Tim Brown, highlights the importance of MQLs and SQLs for his agency:

We really focus on leads, and particularly which ones are MQL's (Marketing Qualified Leads) and SQL's (Sales Qualified Leads) because then we can fix any issues—whether there is a low number of opportunities coming from marketing, or if sales is having a harder time closing deals. Without clarification around the opportunities being created and their quality, it's hard to hold different departments responsible and fix the kink in the "funnel."

As Tim mentions, tracking these two metrics is the backbone of holding other departments accountable and identifying any issues that may be acting as a bottleneck in your funnel.

2. Customer Acquisition Cost (CAC)

Customer acquisition cost (CAC)—defined as the cost to acquire a new client—is essential to budgeting for marketing expenses. In addition to knowing how much it costs overall to acquire a customer, you should know the CAC of each individual marketing channel you're using. Customer acquisition costs are closely related to the next metric every agency should track: customer lifetime value.

3. Customer Lifetime Value (CLV)

Customer lifetime value (CLV) refers to the total amount of money a client is expected to spend during their lifetime of working with your agency. CLV is calculated as the average value of a purchase, multiplied by the number of times they will make a purchase each year, multiplied by the average length of the client relationship.

By knowing both your average CAC and CLV you'll know exactly how much you can spend to acquire a customer, how much you’ll make from the average customer, and how long it will take to reach profitability on a client-by-client basis.

Peter Thaleikis from the web development agency Bring Your Own Ideas highlights the importance of CAC and CLV for agencies:

The critical combination of cost of customer acquisition (CAC) and customer lifetime value (CLV) gives you a strong insight into the health of your business. If your customer acquisition costs exceed your customer lifetime value, your business is in trouble. But even if your lifetime value per customer exceeds your costs to acquire a customer, you might have issues if the customer pays a low amount over a long time. In this case, you will struggle to scale the business as the upfront costs are too high. The CLV is mostly driven by churn. Keeping it under control is as vital as constantly working to reduce your acquisition costs - if either one breaks out your business will suffer.

4. Proposals Sent

Another simple yet crucial KPI to track is the number of proposals sent each month or quarter. Keep in mind that maxing out this number should never be the goal as you only want to focus on qualified leads. That said, having this KPI on hand gives you a sense of how effectively your sales and marketing team are working together.

5. Win Rate

Win rate is another KPI that will keep your sales team accountable and can help you identify potential changes to your pitch that may need to be made. Win rate is calculated by dividing the number of deals closed by the total number of proposals sent for that period.

Karl Sakas from Sakas and Company provided the following insights about proposals and tracking your win rate:

Agencies should target a 50-70% "win rate" for business development proposals. If their proposal-to-close rate is significantly below 50%, they're likely "over-proposing," by sending sales proposals to prospects who weren't a good match. But a higher percentage isn't always positive. If the win rate is 90% or higher, the agency is undercharging; it's time to raise prices, to close fewer (but more-profitable) deals.

Discover the Client Reporting Tool Built for Marketing Agencies

Start Your Free Trial Today!

Agency Pricing & Finances

Pricing can be one of the most challenging parts of finances to figure out, although the good news is that your pricing isn’t fixed and can always be increased as you get more clients and testimonials.

Here’s what Brian Robben, the CEO of Robben Media recommends in terms of pricing:

I recommend marketing agencies start out being project-based and then experiment with a profit-sharing model. Or get creative to do a mix of both payment plans. Whatever the model, if you provide massive value then you can pretty much set your rate, no questions asked.

6. Net Margin

When it comes to agency finances and pricing, one of (if not) the most important metrics is your net margin. Unlike other business models, agency margins can be notoriously difficult to calculate.

In our Guide to Agency Margins, we highlighted that the average margin for agencies is between 11-20%. If your margins are too low, one of the best ways to improve them is to optimize costs by automating manual workflows.

For example, in our guide to Automated Reporting, we discussed how manually generating reports each month is time-consuming and not necessarily a revenue-generating task, which means it should be automated as much as possible.

As the CEO of Rankings.io, Chris Dreyer, noted in a case study, by automating their reporting with AgencyAnalytics they were able to save over $150k annually:

AgencyAnalytics automated the work of two to three full-time employees. It’s been a massive savings cost-wise and efficiency-wise. It’s also been a dramatic time-saver. I’m very happy with AgencyAnalytics and what the tool offers our clients.

7. Cash Flow from Operations

Another key consideration regarding finances is when to charge clients, which has a large impact on your cash flow.Fundbox highlights the importance of cash flow for agencies:

Positive cash flow is critical for any small business, including creative agencies. Without access to cash, creative agencies are unable to hire additional employees to help take on ever-increasing workloads. They’re also not as flexible when it comes to being able to invest in new opportunities (e.g., partnerships or new contracts).

8. Agency Utilization Rate

Utilization rate is one of the most important metrics for agencies and service businesses in general to track. Agency utilization rate refers to how much time your employees spend on revenue-generating tasks. Specifically, utilization is the amount of time an employee spends working on client-facing tasks in comparison to their total amount of available work hours.

Agency utilization rate is defined as a percentage and is calculated as follows:

Where:

  • Billable time is the time an employee spends on client-facing tasks

  • Gross capacity is the total capacity of the billable team

For example, if you want to calculate the utilization rate of a single employee that works 40 hours per week, of which they spend 32 hours on client-facing tasks, the utilization rate is 80%. You can then average the utilization rate across the entire agency by summing the total billable hours by the total capacity.

As the agency productivity tool Productive.io highlights in their article on utilization:

By knowing and understanding your utilization rate, you can make significant improvementsto your company’s profitability.

Customer Success Metrics

Aside from tracking your net profit margins and cash flow, another great way to increase profitability and growth is to closely monitor your customer success metrics.

9. Client Retention Rate

Optimizing your sales and marketing funnel is important, although equally important is retaining clients over the long run, or your client retention rate. Client retention rate is calculated as follows:

The reason that your client retention rate is so important for profitability is that it's often much cheaper to keep a client than find a new one.

As Jack Choros fromIron Monk highlights in our guide to improving client Retention:

It is 70% cheaper to keep an existing customer than it is to find a new one. While the ratio might be slightly different depending on the business model or vertical you’re involved in, the idea rings true in the agency world.

10. Average Churn Rate

Another key customer success metric to track is your average churn rate, which is closely tied to your retention rate. Average churn rate can be calculated as:

Some amount of churn rate is inevitable and to be expected, although a high churn rate is an indication that clients aren't satisfied with a certain aspect of your agency.

As Rahul Gulati, Founder, GyanDevign Tech Services highlights:

I have seen that when agencies take on all sorts of customers, they eventually leave within 2-3 months. You cannot meet expectations of all. So, the best idea would be to understand the client's needs and see if you are the right fit. The best industry standards are 10 percent or below with regards to churn rate.

Summary: Metrics & KPIs Every Agency Should Track

Aside from tracking your client's results, monitoring your own internal metrics and KPIs is essential to building and growing a profitable agency.

Keep in mind that this list is not exhaustive, although hopefully, these insights from agency owners can provide you with a starting point for your own business.

Also, remember that these metrics are not just meant for management—everyone on the team should be aware of the KPIs that they're responsible for, which ultimately enables a culture of accountability, both individually and collectively.

10 Metrics & KPIs That Every Agency Should Track - AgencyAnalytics (2024)

FAQs

What is an example of a metric and KPI? ›

For example, if you're trying to increase customer satisfaction, you might use customer reviews or NPS ratings as a metric and customer retention rate as a KPI. And if you're trying to increase your client's revenue, you might use marketing-qualified leads as a metric, and sales-qualified leads as a KPI.

What is a KPI and metrics? ›

What are metrics? While KPIs measure progress toward specific goals, metrics are measurements of overall business health. While they may be loosely tied to specific targeted objectives, they are not the most important metrics and may not be good guides as to whether you're on track.

What key metrics agency owners are using for tracking profitability? ›

11 Metrics Digital Agency Owners Absolutely Must Track
  • Customer Churn Rate.
  • Customer Lifetime Value.
  • Net Profit Margins.
  • Profitability Per Client.
  • Agency Utilization Rate.
  • Average Qualified Leads.
  • Lead Conversion Rate.
  • Win Rate.
Dec 6, 2022

Should you measure sales performance weekly monthly or year on year? ›

Yearly. Most sales organizations set their sales goals on an annual basis. These goals, once established, can be broken down further into quarterly or monthly targets. If your business has fast sales cycles, such as in retail or in-bound call centers, you might find weekly or hourly units to be warranted.

What are the 12 types of KPI? ›

Some types of KPIs include:
  • Quantitative indicators. ...
  • Qualitative indicators. ...
  • Leading indicators. ...
  • Lagging indicators. ...
  • Input indicators. ...
  • Output indicators. ...
  • Process indicators. ...
  • Practical indicators.
Aug 18, 2022

What are metrics examples? ›

Key financial statement metrics include sales, earnings before interest and tax (EBIT), net income, earnings per share, margins, efficiency ratios, liquidity ratios, leverage ratios, and rates of return. Each of these metrics provides a different insight into the operational efficiency of a company.

What metrics should I be tracking? ›

12 Business Metrics That Every Company Should Know
  • Sales Revenue.
  • Net Profit Margin.
  • Gross Margin.
  • MRR (Monthly Recurring Revenue)
  • Net Promoter Score.

What are KPI tracking methods? ›

There are many methods to track KPIs; you can track them via Google Sheets, Google Analytics, or by using kpi tracker to build dashboards. From the three methods mentioned above, tracking KPI by building dashboards is the most effective way. But not every dashboarding software is easy to use.

What are the four 4 ways to measure the performance of sales staff? ›

Here are four metrics to track to ensure you measure sales performance accurately.
  • Sales Productivity Metrics. How much time do your reps spend selling? ...
  • Lead Response Time. Time is valuable when you're looking at how long it takes reps to follow up on leads. ...
  • Opportunity Win Rate. ...
  • Average Deal Size.
Jun 1, 2022

What are the three important sales metrics? ›

The three most essential sales metrics that SaaS companies should track are bookings (opportunities won), deal conversion rate, and sales rep ramp.

What metrics are used in sales? ›

Sales metrics such as sales growth, ARR, churn rate, net revenue retention rate and average profit margin are particularly important to them.

What are 4 examples of key performance metrics to track? ›

Productivity, profit margin, scope and cost are some examples of performance metrics that a business can track to determine if target objectives and goals are being met.

What is an example of metrics to measure success? ›

Some important business success metrics to track include the customer acquisition cost, monthly recurring revenue, and total revenue. To measure the success of your marketing efforts, you can track the return on investment, customer lifetime value, and the MQL to SQL rate.

What are the 5 metrics that can be used by management to monitor and evaluate? ›

The leading project management metrics include productivity, cost, gross margin, quality, satisfaction, and scope of work.

What are the top 10 KPIs? ›

10 customer experience KPIs to measure
  • Customer Satisfaction.
  • Average Resolution Time.
  • Customer Acquisition Rate.
  • Conversion rate.
  • Cart abandonment rate.
  • Marketing campaign effectiveness.
  • Direct traffic.
  • Pages per visit.
Mar 22, 2023

What are the 9 key performance indicators? ›

Firstly, here are some KPIs a company owner will want to use to measure the overall financial health of the business.
  • Net profit. ...
  • Net profit margin. ...
  • Free cash flow. ...
  • Quick ratio. ...
  • Gross margin ratio. ...
  • Marketing – call-to-action content conversion rate. ...
  • Sales - New contracts signed. ...
  • Accounts – Days sales outstanding.
Oct 26, 2020

What is an example of a smart KPI? ›

A SMART KPI should motivate your employee to work hard to attain it, but also needs to be achievable. EXAMPLE: 75% customer retention month on month or provide quotes to customers within an hour of request.

What are the top 5 KPIs you would track and why? ›

The Most Important KPIs to Track
  • Sales Growth. There is no surprise that sales growth is seen as one of, if not, the most important KPIs for marketing managers and businesses in general. ...
  • Leads. ...
  • Return on Investment (ROI) ...
  • Lifetime Value of a Customer (LTV) ...
  • Customer Acquisition Cost (CAC) ...
  • Conversion Rate.
Jan 18, 2023

What are the 3 types of KPI? ›

Types of KPIs include: Quantitative indicators that can be presented with a number. Qualitative indicators that can't be presented as a number. Leading indicators that can predict the outcome of a process.

What are the 4 Key Performance Indicators KPIs in a balanced scorecard is? ›

The Four Perspectives of BSC and their Key Performance Indicators (KPIs) Examples. As mentioned earlier, there are four perspectives of balanced scorecards: finance, Customer, process, and Learning & Growth. These perspectives include a mix of financial and non-financial indicators that aid in the growth of a business.

What is KPI for employees skills? ›

Key Performance Indicators (KPIs) are metrics that can assist in tracking the ability of your employees to meet your expectations as well as their impact on the business objectives.

What are leading KPI indicators? ›

What is a leading indicator? A leading KPI indicator is a measurable factor that changes before the company starts to follow a particular pattern or trend. Leading KPIs are used to predict changes in the company, but they are not always accurate.

What is a KPI for an employee? ›

To measure performance in an objective way, you can set key performance indicators (KPIs) for staff members, roles or departments. KPIs are standards or targets that you can track and use as a benchmark to measure success. They also provide employees with focus and clarity over what's expected of them.

What is 4 key metrics? ›

Four critical DevOps metrics
  • Lead time for changes. One of the critical DevOps metrics to track is lead time for changes. ...
  • Change failure rate. The change failure rate is the percentage of code changes that require hot fixes or other remediation after production. ...
  • Deployment frequency. ...
  • Mean time to recovery.

What is basic metrics? ›

Basic Metrics are Metrics that are available by default in Databox. No additional work is required to report on these Metrics, so they allow you to quickly and efficiently access data from your Data Sources.

What are the basic types of metrics? ›

There are three categories of metrics: product metrics, process metrics, and project metrics.

What are job metrics? ›

Performance metrics are measurements that show how well employees are performing in their jobs. The metrics that matter most to your results are also a reflection of how well your organization is performing.

How can I improve my KPI tracking? ›

Six Ways To Improve How Your Business Leverages KPIs To Drive Maximum Performance
  1. Decide what is important to track. ...
  2. Don't track too many metrics. ...
  3. Use KPIs to set goals. ...
  4. Automate your KPIs. ...
  5. Provide visibility to your entire team. ...
  6. Review and revise KPIs regularly.
Nov 9, 2022

What is an example of a metric? ›

Metric Units

Examples include measuring the thickness or length of a debit card, length of cloth, or distance between two cities. Weight: Gram (g) and Kilogram(kg) are used to measure how heavy an object is, using instruments.

What is an example of using metrics? ›

While a measure is a simple number, such as, how many miles you have traveled, for example-a metric puts that measure into context - how many miles you have traveled per hour. This additional context makes the same measure orders of magnitude more useful, especially when looking at business KPIs.

How do you create metrics and KPIs? ›

Here's how to develop your own sales KPIs in seven steps.
  1. Determine the Key Strategic Objectives. ...
  2. Describe the Intended Results. ...
  3. Understand Alternative Performance Measures. ...
  4. Select the Right Measure(s) For Each Objective. ...
  5. Define Composite Indices as Needed. ...
  6. Set Targets and Thresholds.

What are the 10 metric measures? ›

Length
UnitValue
Dekameter (dam)10 Meters
Meter (m)1 Meter
Decimeter (dm)0.1 Meter
Centimeter (cm)0.01 Meters
3 more rows

What are 10 metric units? ›

LengthMassVolume
metergramliter
other units you may see
kilometerkilogramdekaliter
centimetercentigramcentiliter
2 more rows

What are the 7 metric measurements? ›

Prefixes are provided in scales that function around 7 units known as metric system (or SI) base units. As shown in Table 1, base units include the meter (m), the kilogram (kg), the kelvin (K), the second (s), the ampere (A), the candela (cd), and the mole (mol).

What are the six key metrics? ›

How to Drive Profitability with 6 Key Metrics
  • Metric #1: Profitability.
  • Metric #2: Revenue per unit (RPU)
  • Metric #3: Direct labor efficiency ratio (DLER)
  • Metric #4: Expenses as a percentage of revenue.
  • Metric #5: Unit churn.
  • Metric #6: Unit acquisition cost (UAC)
  • The bottom line for improving profitability.
Jan 9, 2023

Top Articles
Latest Posts
Article information

Author: Rubie Ullrich

Last Updated:

Views: 6100

Rating: 4.1 / 5 (52 voted)

Reviews: 91% of readers found this page helpful

Author information

Name: Rubie Ullrich

Birthday: 1998-02-02

Address: 743 Stoltenberg Center, Genovevaville, NJ 59925-3119

Phone: +2202978377583

Job: Administration Engineer

Hobby: Surfing, Sailing, Listening to music, Web surfing, Kitesurfing, Geocaching, Backpacking

Introduction: My name is Rubie Ullrich, I am a enthusiastic, perfect, tender, vivacious, talented, famous, delightful person who loves writing and wants to share my knowledge and understanding with you.