What Other Agencies Do - #16 Recognize the Difference between Cash Flow and Profit
Too many agency principals
think that just because they are getting checks for their work they must be
profitable. The fact is, they are losing money—even though they have cash in
the bank.
Successful and highly profitable agencies recognize the difference between cash flow and profits. These agencies realize that just because they get a check for $50,000 from the client, spending $100,000 worth of billable time on the job means the job is losing $50,000.
Frequently, I have had agency principals look me straight in the eyes and justify this loss by saying “We have to pay our staff anyway.” While this may be true, I would put forward that it is a better investment of their extra time to focus on the agency’s new business efforts and sales materials.
Using the extra $50,000 worth of time on your own marketing will not only keep the existing client’s job profitable, you will also bring in new business. This provides additional and more diversified revenue.
Successful and highly profitable agencies recognize the difference between cash flow and profits. These agencies realize that just because they get a check for $50,000 from the client, spending $100,000 worth of billable time on the job means the job is losing $50,000.
Frequently, I have had agency principals look me straight in the eyes and justify this loss by saying “We have to pay our staff anyway.” While this may be true, I would put forward that it is a better investment of their extra time to focus on the agency’s new business efforts and sales materials.
Using the extra $50,000 worth of time on your own marketing will not only keep the existing client’s job profitable, you will also bring in new business. This provides additional and more diversified revenue.
Posted by Agency ADvisor at 8/2/2011 9:00 AM 
Categories: What Other Agencies Do - Weekly Tips
Tags: Advertising Accounting advertising agency Agency Management Business Connie Burtcheard Financial Management Profit profit margins profitability www.agencyadvisor.com
Categories: What Other Agencies Do - Weekly Tips
Tags: Advertising Accounting advertising agency Agency Management Business Connie Burtcheard Financial Management Profit profit margins profitability www.agencyadvisor.com
No brainer and too simplistic.
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