TL;DR
- Track 7 key metrics monthly: revenue per employee, gross margin, net margin, utilisation, revenue per client, cash runway, debtor days
- Target £80k-£120k revenue per employee, 50-60% gross margin, 15-25% net margin
- Investigate immediately if any metric moves more than 10% month-on-month
- Maintain 60-90 days of operating expenses in cash reserves
💡Quick reference summary. Continue reading for comprehensive analysis and context.
You don't need to be an accountant to run a successful agency. But you do need to understand a handful of key metrics that tell you whether your business is healthy, growing, or heading for trouble. Here's what actually matters.
The 7 Metrics That Matter
| Metric | What It Is | Target | Red Flag |
|---|---|---|---|
| Gross Profit Margin | Revenue minus direct costs (salaries, contractors) | 40-60% | Below 30% |
| Net Profit Margin | What's left after all expenses | 15-25% | Below 10% |
| Cash Runway | Months you can operate if revenue stopped | 2-3 months | Month-to-month |
| Utilization Rate | % of team time that's billable | 70-80% | Below 60% or above 85% |
| Client Concentration | % revenue from biggest client | Under 30% | Over 40% |
| Payment Terms | Days from invoice to payment | 14-30 days | Over 45 days |
| Revenue Per Employee | Total revenue ÷ headcount | £80-120k | Below £60k |
1. Gross Profit Margin
Revenue minus direct costs (team salaries, contractor fees), as a % of revenue
Shows what's left after delivery to cover overheads and profit
40-60%
Red flag: Below 30% = underpricing or overstaffing
2. Net Profit Margin
What's left after ALL expenses (overheads, marketing, admin)
Your actual profitability (what you keep)
15-25%
Red flag: Consistently below 10% = unsustainable
3. Cash Runway
Months you could operate if revenue stopped tomorrow
Your safety net for bad months or client losses
2-3 months
Red flag: Month-to-month = one bad month from crisis
4. Utilization Rate
% of team time that's billable to clients
Low = paying people to sit idle. High = at capacity.
70-80%
Red flag: Below 60% (inefficient) or above 85% (burnout)
5. Client Concentration
% of revenue from your biggest client(s)
Over-reliance on one client = major business risk
Under 30%
Red flag: Any single client over 40% = crisis if they leave
6. Average Payment Terms
Days from invoice to payment received
Long terms = interest-free loan to clients, cash flow killer
14-30 days
Red flag: Over 45 days = serious cash flow problem
7. Revenue Per Employee
Total revenue ÷ number of employees
Shows team efficiency and pricing health
£80-120k
Red flag: Below £60k = overstaffed or underpricing
Your Monthly Metrics Checklist
How to Track These Metrics
You don't need fancy software. Start with a simple monthly dashboard that tracks these seven metrics. Review them every month, and you'll spot problems before they become crises.
The key is consistency. Track the same metrics the same way every month, and you'll start to see patterns and trends that help you make better decisions.
The Bottom Line
You don't need to understand every line of your P&L or balance sheet. But these seven metrics will tell you 90% of what you need to know about the health of your agency. Track them monthly, and you'll make better decisions.
Once you're tracking these numbers, dive deeper with our agency profitability guide to benchmark against UK agencies, combine them with a simple forecasting framework to predict future performance. And if you're wondering when to get professional help, here's how to know it's time.
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