The most important KPI in the management of a web studio / agency
Hi, Megamind! Previously, we wrote similar materials on Habr, but after the “management and marketing” stories were removed, we decided to try it here.
Recently, together with UMI, we launched a large educational special project about sales and marketing for studios and agencies (we have already published all 5 seasons in 17 episodes). Within its framework, I prepared a text about key KPIs in managing and planning the development of the agency’s business - and wanted to share it with the Habr / Megamind audience.
Probably, any agency manager with minimal managerial background will be familiar with 80% of KPI described in our material. The purpose of our material is to show the diversity of possible indicators for assessing the effectiveness and efficiency of a business, taking into account agency specifics. If you find in our list of more than 50 indicators at least a couple of indicators, about which you have not previously thought about, and they are important, then we will achieve our goal.
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In addition to this, we wanted to give a general overview of possible planning tools for a studio / agency, accompanying it with our own comments so that the separate sets of indicators could be formed into a single picture.
As part of our material, we will not build a separate financial model of the agency - I have already analyzed this topic in some detail in the earlier materials, and will try to analyze the subject area from a bird's-eye view.
We will not separately dwell on the definition of KPI and the ideology of "management by objectives" - tons of understandable and fairly high-quality materials have been written about this. We will try to consider the indicators from the point of view of the specifics of the agency business, and also draw your attention to the important nuances.
Ideology KPI implies the presence of clear and measurable indicators of various aspects of your business. The “mathematical” approach to the planning and development of the agency, of course, has the right to exist and helps to better understand and calculate what the manager can “feel” at a qualitative level. It is also a great tool for opening problem areas, bottlenecks, as well as a good way to get rid of psychological self-deception (for example, when a client seems to the agency to be very important and promising, and analyzing its actual counted revenue, frequency of orders, etc., says exactly the opposite).
However, this does not mean that you need to rely only on specific measurable indicators. Agencies, as a rule, have a small staff of dozens of people - and much from the point of view of management is built in manual mode and felt “at your fingertips”. This is normal, and do not try to completely get rid of the qualitative approach - it can "dry" the company.
Therefore, the neighborhood in terms of the development of specific quantitative indicators / goals with “quality” Milestone is normal and fully justified.
The importance of certain indicators varies significantly depending on the type of agency, the range of services provided and their specifics, the chosen development strategy.
For example, in the approach of the value disciplines of Tracy and Wyrsema (Alexei Yozhikov read a good report on this topic in the context of agency business on the FTA) with the strategy of leadership in customer centricity, more attention should be paid to the KPI block related customer service (Client Satisfaction Index, CLTV, outflow, number of repeat orders, complaints, etc.), and with operational leadership strategies - indicators by processes (level of production, percentage / speed of tasks in support, average time of project implementation ave.)
A significant part of the indicators can be calculated at the level of the entire business, but it has a much greater practical meaning in segmentation in certain areas and services. For example, the total number of clients in service is a spherical horse in a vacuum, if your agency specializes in both heavy and expensive production and SEO for small companies. 100 clients in total, of which 50 are in production and 50 in SEO, and 100 clients, of which 5 are in production, and 95 in SEO are completely different things, as you yourself understand perfectly well.
Therefore, when building an internal analytics system (it doesn't matter if it is a fancy BI system or three sheets with formulas in Excel) - it is very important to pay attention to the segmentation of indicators.
The KPI system, on the basis of which goal-setting is built (and often the employee motivation scheme) should be simple and complex. The emphasis on one indicator in isolation from others often sets the wrong vectors of development and the wrong motivation of employees.
For example, the development of a new promising direction within the company, which is still in the "subsidy" mode, but is growing rapidly, can be easily ruined by a manager who is motivated only by the operating profit of the entire business on a small planning horizon.
Or a scheme for calculating a sales manager's bonus, which takes into account 25 different indicators, can make it stupidly opaque, add a headache when calculating it - and also give a careless employee the possibility of an unexpected “hack” of the system when his bonus turns out to be unreasonably large relative to the real benefits. for business.
Our review lists a large (redundant) number of different indicators. This in no way means that you need to measure and build business management, relying immediately on everything. "Pills of greed, but more" - then only harm.
Traditionally, in a standard management approach, experts advise using from 10 to 20 really key top-level indicators. At the same time, plunging deeper into internal processes (and taking into account the specifics of the agency business), this list can be expanded by monitoring another 10-30 KPIs related to local processes within the company.
Let us proceed, in fact, to the enumeration of the main types of KPI, divided into 4 main “traditional” segments (finance, clients, processes, personnel). It is clear that in the case of agency business, the role of personnel-related indicators is probably the least important - due to the low average number of employees in the staff (and often the lack of an HR unit as such). It should also be noted that this division is largely conditional and some indicators can be attributed to several segments at once.
Some indicators of a “general nature”, the purpose and essence of which are obvious, we will give without explanation, some (more specific) will be analyzed in more detail. For many of the described indicators, you can write a separate article, but we have tried to give brief semantic extracts - more detailed information on most of them can be quite easy to google.
One of the most common mistakes when building a KPI system is a comparison of “warm to soft”. Often, being in tables with large amounts of data and formulas, the manager forgets which value is full and which value is operational.
We give a simple example. The analyst calculated that the acceptable total cost of attracting a new client (CAC) to the web studio is 60,000 rubles. The marketing manager conducted an advertising campaign, the budget of which amounted to 200,000 rubles, with which he attracted four new customers. He divided one number by another, received an attraction cost of 50,000, and happily wrote in the report that the campaign was successful and that the channel had to be developed.
At the same time, he forgot that 50,000 rubles is an operational value, and the rate of 60,000 is complete, taking into account all costs. And he could have made a big mistake, because if we added to the 200,000 direct advertising costs, for example, the payroll rate of employees who led this company (as well as other indicators of pegged expenses), then the total full amount of the CAC for the campaign could significantly go beyond the norm.
Of course, the indicators described in our review are directly related to the construction of the studio’s financial model. For those who are interested in this topic, I recommend reading my material about an example of a template of a financial model of a web-studio with a detailed analysis.
I would also like to make a small remark about the standard approaches to planning. As a rule, in any financial plan a number of indicators are “fixed” as given at the input, and this allows calculating the values of other indicators at the output using formulas.
There are two basic principles of financial planning (in fact, there are much more approaches, but we give a remark about these two):
The topic of our lecture is also quite tightly connected with analytics on the current client base of the agency, as one of the key components of the business. For a deeper immersion in this topic, I suggest reading my material on possible approaches to the segmentation of the studio / agency client base .
And which KPIs from the list do you consider and use in your agency? Maybe there are some important indicators that we missed in the review? Let's talk about it in the comments.
And we also recall that we prepared a lot of other good free content about marketing and sales issues (as many as 17 episodes) in our free “ Digital-series ”, which we developed together with UMI - join us!
Recently, together with UMI, we launched a large educational special project about sales and marketing for studios and agencies (we have already published all 5 seasons in 17 episodes). Within its framework, I prepared a text about key KPIs in managing and planning the development of the agency’s business - and wanted to share it with the Habr / Megamind audience.
1. Introduction, why this material
Probably, any agency manager with minimal managerial background will be familiar with 80% of KPI described in our material. The purpose of our material is to show the diversity of possible indicators for assessing the effectiveness and efficiency of a business, taking into account agency specifics. If you find in our list of more than 50 indicators at least a couple of indicators, about which you have not previously thought about, and they are important, then we will achieve our goal.
')
In addition to this, we wanted to give a general overview of possible planning tools for a studio / agency, accompanying it with our own comments so that the separate sets of indicators could be formed into a single picture.
As part of our material, we will not build a separate financial model of the agency - I have already analyzed this topic in some detail in the earlier materials, and will try to analyze the subject area from a bird's-eye view.
2. General principles
A couple of words about KPI
We will not separately dwell on the definition of KPI and the ideology of "management by objectives" - tons of understandable and fairly high-quality materials have been written about this. We will try to consider the indicators from the point of view of the specifics of the agency business, and also draw your attention to the important nuances.
The combination of quantitative and qualitative assessments
Ideology KPI implies the presence of clear and measurable indicators of various aspects of your business. The “mathematical” approach to the planning and development of the agency, of course, has the right to exist and helps to better understand and calculate what the manager can “feel” at a qualitative level. It is also a great tool for opening problem areas, bottlenecks, as well as a good way to get rid of psychological self-deception (for example, when a client seems to the agency to be very important and promising, and analyzing its actual counted revenue, frequency of orders, etc., says exactly the opposite).
However, this does not mean that you need to rely only on specific measurable indicators. Agencies, as a rule, have a small staff of dozens of people - and much from the point of view of management is built in manual mode and felt “at your fingertips”. This is normal, and do not try to completely get rid of the qualitative approach - it can "dry" the company.
Therefore, the neighborhood in terms of the development of specific quantitative indicators / goals with “quality” Milestone is normal and fully justified.
Dependence on strategy type
The importance of certain indicators varies significantly depending on the type of agency, the range of services provided and their specifics, the chosen development strategy.
For example, in the approach of the value disciplines of Tracy and Wyrsema (Alexei Yozhikov read a good report on this topic in the context of agency business on the FTA) with the strategy of leadership in customer centricity, more attention should be paid to the KPI block related customer service (Client Satisfaction Index, CLTV, outflow, number of repeat orders, complaints, etc.), and with operational leadership strategies - indicators by processes (level of production, percentage / speed of tasks in support, average time of project implementation ave.)
Segmentation by type of service
A significant part of the indicators can be calculated at the level of the entire business, but it has a much greater practical meaning in segmentation in certain areas and services. For example, the total number of clients in service is a spherical horse in a vacuum, if your agency specializes in both heavy and expensive production and SEO for small companies. 100 clients in total, of which 50 are in production and 50 in SEO, and 100 clients, of which 5 are in production, and 95 in SEO are completely different things, as you yourself understand perfectly well.
Therefore, when building an internal analytics system (it doesn't matter if it is a fancy BI system or three sheets with formulas in Excel) - it is very important to pay attention to the segmentation of indicators.
A couple of words about motivational schemes and goal setting
The KPI system, on the basis of which goal-setting is built (and often the employee motivation scheme) should be simple and complex. The emphasis on one indicator in isolation from others often sets the wrong vectors of development and the wrong motivation of employees.
For example, the development of a new promising direction within the company, which is still in the "subsidy" mode, but is growing rapidly, can be easily ruined by a manager who is motivated only by the operating profit of the entire business on a small planning horizon.
Or a scheme for calculating a sales manager's bonus, which takes into account 25 different indicators, can make it stupidly opaque, add a headache when calculating it - and also give a careless employee the possibility of an unexpected “hack” of the system when his bonus turns out to be unreasonably large relative to the real benefits. for business.
Redundancy of indicators
Our review lists a large (redundant) number of different indicators. This in no way means that you need to measure and build business management, relying immediately on everything. "Pills of greed, but more" - then only harm.
Traditionally, in a standard management approach, experts advise using from 10 to 20 really key top-level indicators. At the same time, plunging deeper into internal processes (and taking into account the specifics of the agency business), this list can be expanded by monitoring another 10-30 KPIs related to local processes within the company.
Let us proceed, in fact, to the enumeration of the main types of KPI, divided into 4 main “traditional” segments (finance, clients, processes, personnel). It is clear that in the case of agency business, the role of personnel-related indicators is probably the least important - due to the low average number of employees in the staff (and often the lack of an HR unit as such). It should also be noted that this division is largely conditional and some indicators can be attributed to several segments at once.
Some indicators of a “general nature”, the purpose and essence of which are obvious, we will give without explanation, some (more specific) will be analyzed in more detail. For many of the described indicators, you can write a separate article, but we have tried to give brief semantic extracts - more detailed information on most of them can be quite easy to google.
3. Finance
- Revenue. Comprehensive indicator. Revenue segmentation for various services / areas. Revenue segmentation by new customers, current customers (re-projects), renewals (subscriptions) and additional orders.
- Profit (including special cases like EVA and EBITDA ). Segmentation by services / products / areas. Segmentation by new and current customers.
- Volume closed by acts of services. Funds for agency services, closed acts for the reporting period. An important indicator reflecting the actual volume of services shipped in production / service for the reporting period. Often used in motivational schemes of project managers, account / sales managers.
- Receivables. The amount of funds that customers must agency, work on which has already been shipped (closed acts). An important indicator for agencies working on mixed and postpaid work schemes.
- Accounts payable. Both in the company as a whole, and private indicator, reflecting the volume of payments received from customers as a prepayment of services, work on which is not yet closed by acts. An important indicator for agencies working on a mixed or prepaid scheme.
- General expenses. Comprehensive indicator.
- The amount of taxes paid. Comprehensive indicator.
- General PH. The total salary fund of the company. Sometimes it is considered “clean” (net) - then the corresponding amendments are made to the tax item, sometimes it is considered taking into account certain taxes (gross, etc.). The key item of expenditure in the overwhelming case of agencies (with the exception of expenses for media procurement within the framework of client activity, which is especially characteristic of media and contextual agencies).
- FOT of producing resources. An important indicator for the agency is the proportion of the total salary fund attributable to employees whose time is sold to the final client - designers, analysts, programmers, etc. As a rule, it ranges from 40% to 60% of the total PHT (decreases with the growth of the company due to the appearance of additional levels of management and attendants).
- PH of non-producing resources. Salary fund of employees whose time is not sold to the final client - administrative, managerial and support staff.
- UPR Conditionally fixed costs. The costs, the volume of which depends little on minor fluctuations in the volume of production and the size of the company, include office rent, utilities, cleaning of the premises, cookies, consumables, etc. As a rule, with an agency business scheme implying no warehouses, machines, heavy tangible assets and etc., the indicator is set at the level of 20-40% of the total payroll of employees.
- ROI / ROMI. The rate of return on investment (sometimes + rate of return on investment), in the case of the agency, as a rule, refers to the cost of marketing and attracting new customers.
- Cost of normal hours. How much is the cost of the normal roles of employees within the company.
- Customer cost of normal hours. How much is the standard hours of different producing employees for the client.
- Overhead coefficient. The average coefficient by which the hourly wage of an employee is multiplied when forming a client's normal hour. It may vary depending on the type of service or work format (employee in the office, freelancing, subcontracting, purchasing, etc.).
- Marketing budget The amount of funds used for external communication and promotional activities. Segmentation by various channels, services, products and directions.
4. Customers
- The size of the customer base. The total number of current customers of the company.
- LT (Life Time). The expected life of the client in the company. Segmentation by type of service.
- CLTV (Client Life Time Value). Total expected revenue per customer throughout the entire life cycle. Simple infographics on how to calculate CLTV . And yet - on the example of an online store .
- CSI (Customer Satisfaction Index). Level of loyalty / customer satisfaction. A simple way to measure: "Rate on a 10-point scale, how willing you are to recommend our service to colleagues and acquaintances." Detract: 1-3, attraction: 8-10. CSI = attract / detract.
- ARPU (Average Revenue per User). Average check per customer over time. Segmentation by type of service.
- The number of claims. The number of complaints / claims received from dissatisfied customers. Segmentation by type of service, segmentation by manager.
- Brand recognition. The level of brand awareness among the target audience. Given the current state of the digital communications market, it is quite difficult to miscalculate, but there are some initial attempts . Allocate spontaneous knowledge and knowledge with a hint.
Attraction (acquisition)
- Number of new customers. The total number of new customers for the period. Segmentation by type of service.
- First check The average first check for a project / service from a new client. A special case of ARPU. Service segmentation.
- Reach (coverage). The first step of the standard marketing funnel (sales funnel). The number of potential customers who have contacted your advertising message (banner, post, booklet, etc.).
- CTR (Click Through Ratio). The banner / carrier clickability rate is equal to the number of clicks divided by the number of views (contacts) multiplied by 100%. It is believed that the average spherical CTR banner in vacuum is somewhere around 0.05% (one click on two thousand views).
- CPC (Cost per Click) / CPV (Cost per Visitor). The cost of a click on the site and the associated indicator of the cost of the visitor (which is always a little more, since not all clicks on the media turn into site visitors)
- Site attendance. As well as the core of the audience, the percentage of unique visitors, the percentage of failures, time on the site, the depth of viewing and other related indicators.
- Conversion to leads. The conversion rate of site visitors (people on the stand, etc.) in the application for the company's services.
- Kostz A special term for agencies operating in the high price range. Number of Appeals Consonant with Price. Allows you to cut garbage and leads, guaranteed not passing under the minimum budget. In terms of motivation, it allows marketing to target higher-quality leads, rather than chasing them.
- CPL (Cost per Lead). The cost of attracting one lead. Allocate full and operational. Service and channel segmentation.
- The number of leads. The total number of leads received over a period of time. Segmentation by channels and services.
- Conversion to sale. Conversion from lead to client. Segmentation by channels and services.
- CAC (Customer Acquisition Cost). The cost of attracting a client. Allocate full and operational. Segmentation by channels and services.
- Leadgen / image ratio Internal coefficient that can be used to estimate channels that have both image and selling components. In the case of purely selling channels, it is close to 100% (for example, contextual advertising), in the case of purely image channels (for example, the teaser of a billboard with the logo of a new brand) is close to 0%. May be entered as an internal norm by channel. For example, “contextual advertising in our country should have a CAC not exceeding the acceptable one, and the rating sponsorship channel has a coefficient of 33% - which means that the cost of attracting new customers for it can be three times higher than the average CAC, and the rest is written off as an image effect”.
Hold (retention)
- Churn rate. Outflow rate. Mainly used for services that imply a monthly fee and regular renewal of services. Equal to the ratio of users who have left to the total size of the client base over a period of time. Allocate actual and analytical outflow. In the first case, the number of users actually ceased to use the service is taken into account (although the payment period may not end). In the second case, the outflow is recorded upon the termination of payment. In the project business, the customer’s refund rate or conversion to re-purchase is used. Service segmentation.
- DBTR (Data Base Transformation Rate). Dynamics of client base change over time. Serves as one of the bases for the calculation of CLTV. The material with some details on the example of ecommerce .
- Customers on support. Since support is often regulated by separate processes within an agency, it is sometimes taken out as a separate indicator.
- Conversion in support. Conversion of the transition of the implemented project to support services.
- Retention Cost. Cost of customer retention. By analogy with CAC, it is considered as the ratio of the total costs of retention measures to the number of customers “returned” from the outflow. Segmentation by type of service.
- Frequency. The average frequency of the current client for a service. Segmentation by type of service.
- The number of returning customers. The number of customers who went into the outflow, but returned to the number of permanent - on their own, or as a result of measures for their return.
- Due date. For subscriber schemes / services - the average term of payment for the service / service.
5. Processes
- Volume of production. Total production in hours at 100% load. Segmentation by roles and types of services.
- Focus factor. The percentage of time that an employee (for example, a programmer) actually spends on the implementation of project tasks is the total amount of working time. Segmentation by employee roles and service types.
- The average amount (time) of the project / account in hours. Segmentation by type of service.
- Production load percentage. The average percentage of production load of commercial tasks. Segmentation by roles and types of services.
- The volume of closed orders. For services that have a similar format of calls (for example, tickets in support).
- The percentage of completed applications. For services that have a similar format of calls (for example, tickets in support).
- The percentage of failures. The percentage of clients who left the company before the completion of the project / reporting period of the service is de facto, having broken off cooperation in an emergency mode.
- The average number of bugs on the project. As part of this review, we will not particularly delve into QA issues on web development and other production issues; this can be a separate great material.
6. Staff
- General staff of the company. Comprehensive indicator.
- Staff turnover. The ratio of the number of departed (or new when considering the immutability of the staff) staff to the total staff for a period of time.
- Level of education, segmentation by grades. Special metrics on the level of education or competence / qualifications of employees that can be implemented in the company. For example, the number of certified Google-specialists to the total staff of the unit.
- Gross revenue / profit per employee / producing employee. Comprehensive indicator. Service segmentation.
- Increase in revenue per employee at a fixed payroll. It shows how efficiently the current motivation scheme works (revenue should grow).
- The speed of closing vacancies. HR-characteristic, the ratio of the number of closed vacancies to the ones that have appeared.
7. Comments
Comparison of full and operational values
One of the most common mistakes when building a KPI system is a comparison of “warm to soft”. Often, being in tables with large amounts of data and formulas, the manager forgets which value is full and which value is operational.
We give a simple example. The analyst calculated that the acceptable total cost of attracting a new client (CAC) to the web studio is 60,000 rubles. The marketing manager conducted an advertising campaign, the budget of which amounted to 200,000 rubles, with which he attracted four new customers. He divided one number by another, received an attraction cost of 50,000, and happily wrote in the report that the campaign was successful and that the channel had to be developed.
At the same time, he forgot that 50,000 rubles is an operational value, and the rate of 60,000 is complete, taking into account all costs. And he could have made a big mistake, because if we added to the 200,000 direct advertising costs, for example, the payroll rate of employees who led this company (as well as other indicators of pegged expenses), then the total full amount of the CAC for the campaign could significantly go beyond the norm.
Financial studio / agency model
Of course, the indicators described in our review are directly related to the construction of the studio’s financial model. For those who are interested in this topic, I recommend reading my material about an example of a template of a financial model of a web-studio with a detailed analysis.
Planning Approaches
I would also like to make a small remark about the standard approaches to planning. As a rule, in any financial plan a number of indicators are “fixed” as given at the input, and this allows calculating the values of other indicators at the output using formulas.
There are two basic principles of financial planning (in fact, there are much more approaches, but we give a remark about these two):
- Top-down scheduling. Planning from goals to resources. The company's management sets as a goal the achievement of a certain number of new customers - and the marketing director makes a plan with a minimum budget that will allow you to achieve your goals.
- Bottom-up planning. On the contrary, planning from resources to goals. The head of the company, for example, rigidly fixes the marketing budget for the year “at the entrance”, and the marketing director makes a plan that will allow to achieve the maximum growth of the client base “at the exit” with the specified budget.
Approaches to customer base segmentation
The topic of our lecture is also quite tightly connected with analytics on the current client base of the agency, as one of the key components of the business. For a deeper immersion in this topic, I suggest reading my material on possible approaches to the segmentation of the studio / agency client base .
And which KPIs from the list do you consider and use in your agency? Maybe there are some important indicators that we missed in the review? Let's talk about it in the comments.
And we also recall that we prepared a lot of other good free content about marketing and sales issues (as many as 17 episodes) in our free “ Digital-series ”, which we developed together with UMI - join us!
Source: https://habr.com/ru/post/283876/
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