The dashboard you need to track your agency’s financial performance

19th June 2024 – by Paul Muggeridge-Breene, Thrive CEO

What was your agency’s real financial performance last month?

I’m not talking about cashflow, important as that is. I mean what was the value of the work actually carried out during the month, and how much of that was left after all outgoings?

Understanding financial performance is the first step towards really feeling in control of your agency’s finances. And it’s the only way to feel confident in making the dozens of decisions you face every day when running an agency.

Here’s how to make a simple financial dashboard that will show you at a glance how your business is performing.

1. Build the framework

Start with a blank spreadsheet, either in Excel or Google Sheets. If you use Excel, make sure it’s a live version so that you only ever have a single dashboard (rather than multiple copies flying around with different version numbers etc).

In the first column, list the key categories:

  • Sales:
  • Revenue
  • Costs of sale
  • Income
  • Outgoings:
  • Staff costs
  • Other costs
  • Total outgoings
  • Net profit

Then enter the month names for your financial year across the top row, and add a “Total” column header at the end.

2. Enter the formulas

Now enter simple formulas to do the calculations required. You want the cells in the “income” row to be revenue minus costs of sale, the cells in the “total outgoings” row to be staff costs plus other costs, and the cells in the “net profit” row to be income minus total outgoings.

So, for example, assuming you’ve started your categories in row 2 and your first month is in column B, the formula for income in your first month would be “=B2-B3”. Then you can drag the cell across the rest of the row to copy the equivalent formula into the rest of the months.

3. Enter the data

Now you need to get your financial data into the spreadsheet. There are lots of ways of doing this, with some being more complicated than others.

The simplest way is to just gather the data and manually enter it. You could potentially take it from your accounting system, or whatever system you currently use to manage your finances. But there’s a big caveat here. You need to enter figures relating to the actual work that was carried out during each month.

Your accounting system almost certainly shows figures based on the value of the invoices that were sent and received during each month. These figures are unlikely to be the same as the value of the work you did, or the value of the outgoings associated with that work (although they might be if your work is made up of 100% retainers).

One way of calculating the “actual work” figures is by taking each piece of confirmed work you have and splitting the revenue evenly across the period it runs for. Eg a £60k project running from March to May would be £20k for March, £20k for April and £20k for May. Then do the same thing for any associated costs – eg contractors etc.

Your other outgoings can generally be entered based on when they were paid, if they’re mostly monthly recurring bills. But if you have a big one-off cost that covers multiple months (eg an annual insurance bill) it would be better to spread it across the relevant period.

A key point to note is that VAT shouldn’t be included in any of the figures in your dashboard, as it’s irrelevant from a business performance perspective – you’re just passing it on to HMRC. So, all revenue, costs and outgoings figures should be VAT-exclusive.

4. Add some key metrics

Now that your dashboard is beginning to take shape, you want to add a couple of key metrics that will help you understand the performance of your agency. 

The first metric is net margin, calculated as your net profit divided by income (not revenue).

The second metric is staff costs to income, calculated as staff costs divided by income.

You can enter formulas for both of these metrics in new rows at the bottom of your dashboard. They’re calculated as percentages, so don’t forget to format the cells as such.

The advantage of using metrics like these is that they’re often easier to interpret at a glance than the bald numbers. Generally, you want to be aiming for a 20% net margin and between 55-65% staff costs to income ratio, both after you’ve been paid at a market rate.

As ever, there can be nuances involved here, and metrics are only ever designed to guide you and help with decision-making, not to make the decisions for you!

And that’s your dashboard complete. It’s simple, and deliberately so, as you want a dashboard that you can understand at a glance. The complex part can actually be getting the right numbers into it. But that’s more than worth the effort involved, because of the crystal clear view of your agency performance it provides.

Paul Muggeridge-Breene is an exited agency founder, former international journalist and a member of the British Psychological Society. Please get in touch if you’d like to discuss how Thrive can help you.