The easiest way to identify issues at an agency is benchmarking.
It’s one of the first steps I take when building growth strategies because it tells me where to dig deeper.
Here’s what I evaluate, some questions I ask, and some notes on implications:
Revgen
Revenue growth
- How does this compare to industry averages? Quantify agency potential.
- How does this compare to leadership’s goals?
- How does it compare to employee growth? Is Rev/FTE expanding/contracting? Can they support that level of revenue with that employee base?
Hourly rates
- How has this trended over recent years? Why?
- How is this influencing revenue growth? Compare it to new clients.
- Compared to margins, is there an issue with rates or project efficiency?
Rev/FTE
- How’s this sit vs. the industry average? Quantify agency potential.
- How has this been trending in recent years?
New clients
- Are they bringing in enough new business?
- Is it the right business?
Client tenure
- How does this compare to industry averages? Quantify agency potential.
- How does it compare to new client adds? Are they having to backfill with adds?
- How does this compare to margins? The data says longer tenure = higher margins.
- How’s this trending vs. margins? Are new clients higher/lower margin?
Client concentration
- Are they overexposed to a specific client?
- How’s this track with revenue growth and margins? Is one client the main driver?
- Compare to project load: Are they serving too many small clients?
Operations
Employee growth
- Used for revenue comparison.
Utilization
- How does this compare to industry averages? Quantify agency potential.
- Compare to margins to see if there’s an efficiency issue.
- How does this look vs. employee churn? Burnout?
Project load
- Compare to utilization rates and employee churn to see if there’s an issue with PM.
Employee churn
- How does this compare to industry averages? Quantify agency potential.
- Compare to margins. Is churn causing profitability issues?
Financial
Days sales outstanding
- Comp. to industry averages. Quantify agency potential.
- How does this compare to cash on hand? Is a high DSO causing risk-aversion and resulting in a higher cash on hand balance?
Cash on hand
- How does this relate to growth? Are they running too conservatively/risky?
Operating expenses
- Compare to revenue level. Is this an appropriate level of support spend for the revenue they’re generating?
- Compare to margin goals. Do they need to grow into this OpEx spend or shrink OpEx to meet the current revenue level?
Revgen investment level
- How does this compare to revenue growth?
Margins
- How does this compare to industry averages? Quantify agency potential.
That’s not an exhaustive list, and it’s not meant to be.
We’re doing the initial tirage here.
We need a high-level scan to guide the next level of evaluation. After doing this 100+ times over the last decade, this list has surfaced a lot.
Where to Find the Data
Unfortunately, quality data on these isn’t easy to come by. This is the main reason why Promethean exists. Back when we started in 2015, there was even less available.
I published some data in a previous newsletter.
Then, there’s our industry primer, which has more and a number of time series for historical reference.
Finally, we do a State of Digital Services Study annually that hits most of the high points. (keep an eye out; we’re fielding this year’s study in a few weeks).
Those should get you most of the way there.
What if We Don’t Track Those?
But what do you do if your agency doesn’t track those metrics?
Having an industry average isn’t really helpful if you don’t have your own internal metrics to check it against.
It turns out that the old adage “revenue cures all” is real.
It’s typically safe to start with revgen.
As you’ll see, the order of these is essential. Decisions made early on ripple through the rest. Trying to start at the end leads to a bunch of circular conversations that muddy the process and make it impossible to define a solid direction.
Value
Value is a big one. Why do your clients REALLY hire you? What are they buying?
It’s not a website. It isn’t technical SEO. And it sure as hell isn’t an elaborate design system.
More often than not, it’s security. It’s trust. It’s reliability.
Growth, savings, and ROI are in there too, but they’re not differentiators, they’re expected.
I don’t believe I’ve ever met a team who can articulate this.
Figure out the real value you deliver to clients and make sure your team understands their role in creating it.
TEST
- Figure out what your clients are buying.
- Ask your team (individually) to describe the value your agency delivers to clients.
- Do they match?
- If they differ, you have an alignment issue.
- If they can’t articulate it, you have a communication issue.
- If it’s weak but correct, you have a service mix issue.
ICP / Buying Committee
Who do you create value for?
Building out ICPs and buyer personas can quickly become a performative waste of everyone’s time.
Forget all that.
Let’s simplify them to what moves the needle.
The goal of an ICP is to make it so you can filter the corporate world into a realistic list of targetable accounts.
Here’s what matters for an ICP:
- Industry/sector
- Size
- Location
- Triggers (things like M&A, turnover in a specific role, launching a new product, securing funding, etc.)
- Tools and tech (if they impact your work)
- Dominant industry trends that impact them
The goal of a buying committee is to understand who you’re selling to, what matters to them, and any constraints they face.
You need to understand this because different people need to hear different things to break through the inertia that stops us from trying new things and working with new people.
Here’s what matters for a buying committee:
- Who’s your internal advocate?
- Who influences the deal?
- Who has budgetary control / final say?
Then, for each of those:
- Typical job title and department
- Where they source information
- Personal motivations
- What are they trying to accomplish in their role?
- What friction do they face in their current day-to-day?
- Pain points (data-driven, not guesses)
- What’s their dream state?
- What friction or blockers prevent them from buying?
TEST
- Does your value match the pain points in your buying committee?
- How many deals in your sales pipeline match your ICP?
- How many ICPs do you have?
- How many can your marketing and sales teams realistically create fully detailed buying committees for?
- How many individual messages can you afford to effectively deliver without your brand becoming a muddy mess?
Message
Tell them what they want to hear.
Most agencies talk about what they do. That’s a mistake.
Messaging needs to focus on the value clients get, framed in a way that matters to your buying committee.
That’s your core message.
There’s an art to copyrighting that can take these to another level, but you can get pretty far (at least far enough to hire that out to a specialist) with just the core message.
TEST
- Does your home page speak to your internal advocate?
- Does your marketing and sales collateral cover the typical buying committee?
- Does that collateral speak to their individual pain points?
- Does it address their needs across the various funnel stages?
Channels
Go where your people are.
The “where they source information” component of the buying committee is just as critical to get right as the pain points.
You can have everything else dialed in, but if you’re investing in Bluesky content while trying to sell into the petrochemical industry, you’re fighting an uphill battle. I mean, maybe, I don’t really know where petrochem execs hang out, but I’m guessing it isn’t Bluesky.
TEST
- How many quality leads do you get from each channel?
- Where did past ideal clients meet you?
- Count how many channels you’re active in.
- Quantify the effort/cost necessary to participate in each.
- Do your channels match where your buyers seek new information? Do they match where your past ideal clients met you?
- Cut the channels that don’t match or don’t meaningfully support the ones that do.
Don’t beat yourself up on this one.
Peer networks tend to be a key channel for most agencies, and getting into those rooms and conversations can take a lot of work and time.
There are also a ton of channels where it’s “easy” to show up, but be careful since effort there takes away from effort in more effective channels.
Tactics
Channel presence is critical, but how you show up in those channels can be just as important.
A growth strategy is elegant when the components mesh well and support one another. Growth tactics need to match the ICPs, messages, and channels.
As I noted in the channel discussion, peer networks tend to be a key channel for most agencies, so referrals are an example of a tactic that would match well with that channel. Cold outreach doesn’t.
Beyond matching your tactics with your buyer personas, you also need to take into account your ICP’s firmographics. A good example of this is how different tactics are effective for different-sized accounts.
In our How Digital Agencies Grow Report, we found that the efficacy of a number of tactics fell as the size of the target client grew.
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Furthermore, you’ll use different tactics, channels, and communication mediums for various buyers at various points in the buying journey.
Agencies that struggle often jump from tactic to tactic, looking for a silver bullet.
Successful agencies focus on a narrow set of effective tactics that align with their buyers, channels, and growth goals.
TEST
- List your current sales and marketing tactics.
- Is there a purpose for each?
- Are there duplicates?
- Are there holes in the buying journey?
- Rate how good your team is at executing each tactic.
- Answer if it’s a skill issue or a tactic mismatch.
- Honestly evaluate how many resources are required to be successful in each channel vs. what you have at your disposal.
When You’re Missing Metrics, Start With Revgen
When a shop’s in trouble, starting with quality revgen can make a massive difference.
It requires a few weeks of introspection. Step back and figure out what’s broken: your value prop, your ICP, your messaging, your tactics, or all of the above.
Don’t forget the note about new revenue being profitable and cashflow accretive.
Once you have that clarity, simplify.
Cut what doesn’t serve you and double down on what works.
