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Hello and welcome to today’s SAGA webinar Setting and Meeting your Revenue Growth Goals. I’m Chip Griffin, the founder of SAGA, the Small Agency Growth Alliance, and I’m looking forward to a good conversation over the next hour or so about how you set your revenue targets, how you should be thinking about them.
Why they matter and where they tend to go astray. So those are things that we’ll be covering. But before we do, as always, I will go through a few housekeeping items here as people are continuing to filter in. First of all, the full replay of this webinar, along with all sorts of other webinar replays, is available to SAGA Pro members on the SAGA website.
You can use the q and a function here at the bottom of your screen probably to ask questions. I will take all of the questions at the end from anyone who is participating live during this webinar. If you’re watching this on [00:01:00] replay, you won’t have the q and a session, but you will have the opportunity to either email me with your questions at firstname.lastname@example.org, or you can go into our Slack community for SAGA members.
It’s free of charge and a great place to ask your question where you get feedback, not just from me but also from other agency leaders. If you have any question at any time, if you’ve got something that you don’t want to ask publicly, feel free to email that to me as well. If you’re talking about this webinar on social media, I would encourage you to use the hashtag agencyleadership, and if you’d like to access any of the SAGA resources that I mentioned today, or frankly any of the others – articles, work, workbooks, templates, videos, replays, everything, go to smallagencygrowth.com.
So with that, let’s go ahead and jump into talking about what the agenda is for today’s conversation. First of all, we’ll talk about how most agencies are currently setting their revenue goals. We’ll explore the [00:02:00] difference between revenue and profit targets. We’ll try to understand how both new and existing revenue contribute to meeting your revenue growth goals.
We’ll look at the difference between budgeting and forecasting, because I think there’s some misunderstandings in the small agency community and things that could be done better. We’ll talk about a better way to set your revenue goals overall, and that’s sort of the meat and potatoes of this discussion.
How should you be setting those goals so that they are realistic and attainable? And then we’ll talk about how you test your assumptions, how you test your model to make sure that it will actually work. And finally, we’ll talk about comparing yourself or benchmarking yourself against other agencies. So with that, let’s talk about how most agencies currently set their goals.
Yeah, that’s right. Just kind of blindfolded and throw in a, a dart at a target without really any idea. And some of the things that I hear when I talk to agency owners about how they’re setting goals or how [00:03:00] they, they think about setting revenue goals. They talk in terms of wanting to be this kind of agency or that kind of agency.
I want to be a seven figure agency. I wanna have at least a million dollars in revenue. Or maybe I’m thinking about exiting. So I have a specific dollar value in mind that I’ve been told that I need to get to in order to be able to sell for the kind of price that I’m looking for. Sometimes it’s just someone grabbing out of the air a percentage that sounds good or sounds aggressive.
Sometimes that percentage may be based on what they’ve done in the past or what they’ve heard some other agencies are doing now or what they’ve set their own targets at. Sometimes it may be in terms of thinking that there’s going to be a turnaround for good or for bad. Maybe we see signs that things are slowing, so we assume we should factor in some diminished revenue next year.
Maybe we feel good about things. Maybe we feel like we’ve made some good hires and we’ve got some momentum going, so therefore we should set a higher number. And of course, right now we’ve got a lot of folks who are thinking, geez, maybe there’s a recession on the [00:04:00] horizon. How does that impact things? How do I factor that into my growth targets?
So these are all, it’s, it’s really relying more on gut and emotion rather than fact. And so what I’m gonna talk to you about over the course of today’s session is really thinking about how you can use facts and proper modeling to figure out what are the best targets to use for your own agency in looking at what your revenue is going to be, 3, 6, 9, 12, 18 months or more down the road.
And so one of the things we need to be thinking about when we’re doing projections or targets or goals for revenue is how does revenue play into profits? Because I often hear people talk about setting revenue goals, but I very rarely hear people talking about setting profit goals. And that’s for two reasons.
One is because a lot of folks think that profit just tracks revenue. So if I double my revenue, I should be doubling my profitability, and so therefore that’s good for me as an owner. But the reality is, and many of you know this from your own [00:05:00] experience, that there isn’t a one-to-one relationship in the growth of revenue and profitability because not all revenue is created equal.
Some is better than others, and it’s better not just from a profitability standpoint, but as we’ll talk about later, it’s about finding the ideal clients and good revenue that is satisfying that you can produce results for those clients. That’s different from just focusing on revenue that will get your top line number up.
So don’t think just about your top line. Think about the bottom line. Think about how you are going to set targets, not just for revenue, but also profitability. Because if all you measure is revenue, that’s what you’re likely to. And so if I say, you know, I want to get a million dollars in revenue, your odds of getting a million dollars in revenue are much better than getting a million dollars of profitable revenue because you focus so much on that target.
So think about what you need for profitability, and most agencies should be shooting for something in the neighborhood of 20% profitability. [00:06:00] And that means that if you have a million dollars in revenue, you should have $200,000 in profits. And one of the things that you’ll find is that I always talk about the importance of understanding the compensation you get as an agency owner for the work that you do for the agency, versus being the owner and taking the risks for the agency.
So that means that the $200,000 in that example, for a million dollar agency, that would be the compensation that you take for the risk, that’s the profits. But you should also be compensating yourself for the work that you’re doing. So if you’re a full-time employee, that should be a six figure salary on top of that.
So a million dollar agency, the owner should be taking home somewhere between three and $400,000 a year if you’re hitting those profit margins. Now that may not be what you’re trying to do in the short term, and you may have other objectives, so you may want to revise those, but do it consciously and don’t do it because you’ve set a revenue target because it feels good. There’s an ego boost to being a million dollar [00:07:00] agency.
You also need to understand the short term versus long term. So as you’re growing, as you’re adding revenue, your profitability is likely to shrink for a period of time, particularly if you’re in a period of rapid revenue growth. And the reason for that is because it’s expensive typically to do the things that you need to do to scale.
That means bringing on people. It means training people. It means you have the costs of recruiting. And so all of those things as you’re scaling up, as you’re growing rapidly, can often cause your profit margin to dip. That’s okay, as long as it’s short term and you’ve planned for it. But again, this is why revenue and profitability are so closely tied together and something that you really need to be thinking about.
You also need to be thinking about as you’re setting your revenue targets, why you decided to own an agency in the first place. What put you there? And make sure that when you’re setting your targets, it all feeds into achieving those goals. And you haven’t sidetracked yourself by saying, well, I’m told that these are the [00:08:00] things that I should be doing.
Or I read somewhere that if I don’t have 20% growth, that’s not healthy for the agency, that I need to be growing at that rate for my first five or 10 years. And you’ll find all of these things out there, whether you’re talking to other agency owners who have passed it on because that’s what they’ve heard other people say, or maybe it’s they’ve been their own experience.
Or you’ll see an article from an expert. You need to really personalize your revenue growth plans just like you personalize all of the other plans for your agency. And finally, when we’re thinking about revenue versus profitability, remember that you might be in a better situation if your revenue dips, but your profitability increases if the satisfaction that your clients feel and that you feel from the work that you’re doing increases.
So don’t use revenue as the only yardstick that you’re measuring by. It is absolutely important, an important one, but it’s often more about ego than results. So don’t let your emotions cloud you. Make sure that you are thinking very carefully about that relationship between revenue and [00:09:00] profitability.
There’s also a relationship between new and existing revenue when you’re thinking about setting your targets. And most of the time when I talk with agency owners about setting revenue growth goals, all of the discussion is around business development and how can we find new prospects to get into our pipeline that we can close and convert and generate contracts for so that we can get additional revenue.
But the reality is, in order to hit your revenue growth goals, you also need to focus on client retention. So you can’t have a conversation about how to grow without having a conversation about how to keep the existing business and keep your current clients satisfied. When you’re putting together these targets, you need to factor in the fact that it is likely that you will lose business over the course of the year from some of your existing clients.
It is a rare agency that has a hundred percent retention for all of their clients over the course of any 12 month period. And certainly as you look into longer time periods, it’s [00:10:00] almost impossible to have a hundred percent retention. So if you’re going to get good at revenue forecasting, you have to get good at predicting how much attrition you are likely to have.
Obviously, as your agency continues to to grow and you get more experience, this becomes a little bit easier and you can anticipate a little bit better. There are obviously going to be times where you have big blips. There are things like recessions or the Great Recession from 15 years ago, or covid, or any of these kinds of things that can cause unanticipated more dramatic spikes in attrition, but you should have a pretty good handle on what to expect overall from your client base. And we’ll talk about how to factor that into your actual plan to make sure that it’s accounted for properly. But you also need to remember that this retention, while it’s not as glamorous, it’s not as fun as, not as exciting as closing a new client.
It’s incredibly important to being able to set and reach these goals effectively because you [00:11:00] can’t be just relying on new business. In fact, I’ve worked with some agencies that almost all of their revenue was coming from new business because they had such a high attrition rate, such a short, typical lifetime for their clients.
That’s not a sustainable model, that’s a, that’s a sales engine, but it is not a true viable agency that’s running a good business because you need to be able to set the expectations for your new clients effectively, then deliver the results that they have been promised, and that leads to higher retention, which leads to a much more sustainable, scalable, growth driven business as opposed to just a sales driven business.
So as we’re putting all this together, now it’s time to sit down and think about, okay, let’s put together what our actual targets are. And there’s two ways to think about this. And there’s budgeting and there’s forecasting. And a lot of you may go through some sort of a budgeting process. And what I will tell you is that I am not a huge fan of budgeting for particularly [00:12:00] smaller agencies.
I tend to to want folks to think more about forecasting. And the reason is this. So a budget, if you think about it, is something that large organizations typically use and it’s permission to spend based on the revenue that you anticipate receiving. And if I’m a GE or a Microsoft or something like that, that makes perfect sense. Because we have a really good idea at, you know, big numbers where we’re likely to be. And we’ve got big, large cash reserves that we can typically rely upon or lines of credit or those kinds of things that will allow us to smooth through things. And so we can go to a department and say, look, you know, this is your budget for the year. We’ll let you figure out how to spend it.
When you’re in a small agency, little changes can make a big difference. Adding a new client, losing a client, those things can cause dramatic swings in what we can spend and what we’re anticipating for revenue. So I prefer to focus on forecasting. Now, if you’re, if you’re really of the budget mindset and you wanna [00:13:00] focus on having a budget, that’s fine.
And if you’re a mid-sized agency, you know someone who’s on the, the larger side of small or the smaller side of mid, and you’re still listening to me, you may have a budget, it may make sense because whoever is running a certain team is separated enough from the day-to-day leadership of the business that they need to have numbers that they can rely on.
Even in those cases, you should be putting in place a reforecasting process, typically on a quarterly basis, so that you can sit down and say, look, here’s what we think now based on, you know, we put together the budget back in, let’s say October or November. We’re now coming up to the end of March. Let’s take a look.
Let’s reforecast and figure out how do things look? Because now we’re at least six months away from when we first started assembling that budget. A lot of stuff has probably happened in that period of time. And so if you’re putting together your own forecast as an agency, it should be much more reliable for the next quarter than it is for three or four quarters out.[00:14:00]
The closer you are in time, the easier it is to predict revenue and expenses because you know what your headcount looks like. You know what your current client roster is, you know what’s in the pipeline and likely to close in the next few weeks. Because really when you think about it, if you’re forecasting for your agency and, and you wanna forecast for the next quarter, the next 90 days if you have, if you don’t have a prospect in the pipeline that’s about to close, they’re probably not gonna turn into revenue in the next 90 days anyway. You can’t assume that there would be someone who magically shows up and decides to sign a contract, and it all happens in a week or two.
Does it happen? Absolutely. We’ve all had it happen, but it’s not something that we want to rely on when we’re putting together our budgets and forecasts. We don’t want to look at magical revenue as what solves our target issues. We want to focus on what we know, what facts are in front of us, and so we’ll talk about how to do that more specifically.
But these forecasts will help you to tie it more closely [00:15:00] to reality and more closely allow you to plan what you need in terms of resources. So what is the way? If we don’t want to just throw random darts, if, if I don’t like just coming up with, with numbers that feel good, that sound good, that are convincing to outsiders, how should we be putting together our revenue targets?
And the way that I like to do it is really a very simple, practical, boring way of doing it. And so that is putting together individual account models. And so the way that I would suggest we do that, well, first of all, we wanted to sit there and take an Excel spreadsheet and, let me just kind of, let’s see if I can switch cameras here and we’ll try to use my penmanship appropriately here.
But basically in, in this spreadsheet, we’re gonna have 12 columns. I’m not gonna draw all 12 here because I’m not that good at drawing, but we’ll have each month, so January, [00:16:00] February. March. And that’s enough of my horrible penmanship for you. But that gives you an idea. So we have this, this spreadsheet by month, and then we start up here when we put our existing clients one per line.
So we have clients A, B, C, et cetera. And what we do is we want to start modeling out, you know, this client is gonna pay us 5,000 in January, this one’s gonna pay us 10, and this one, let’s say is 7.5. And so then we carry it forward and we say, okay, they’re gonna continue all the way through, the entire year, but let’s say we think client B, they’re probably gonna stay with us for the first quarter.
They’ve got a renewal coming up and for whatever reason we think that they may not renew it that point in time. So we’re gonna forecast it that way. And so what this does is this allows us to look at our, what our existing revenue projections are. So for our existing clients, and this is… I won’t say it’s the easiest, but it is easier than trying to figure out what you’re going to sign for true new business.
Now, [00:17:00] you can either do it this way where you’re specifically guessing which clients are gonna fall off. If you don’t want to do it that way. You could say, okay, I’ll have, let’s say I’ve got these clients and I’ve got another one here that’s at, at five a month. Maybe I just say that if I’ve got two, five a month clients, one of them is gonna go away, let’s say, you know, halfway through the year.
And so you can try to, to build your attrition in that way. Another way that I’ve seen agencies do it is you simply put in a loss column and you say, okay, I assume that over the course of the year I’m going to lose, you know, roughly $60,000 of existing business. And so I put minus 5 in the column for each of those. There’s a number of different ways that you can account for that attrition, but make sure in this spreadsheet projection that you’re doing month by month for your existing clients, that you’ve got something in there so that you’re not simply saying, okay, I know in January I’ve got these four clients and I just assume it’s gonna ride straight on through the whole year.
If [00:18:00] you’ve got project-based clients, put it in where you think that they will do work. So if these are all retainer models, but let’s say client C here is more project-based, and so we think they spend seven and a half in January, but let’s say in April, you know, because they have a big conference.
We think they typically will do a 15 K project there, right? So try to do this as accurately as possible so that you can see exactly where the revenue is falling. And one of the things you’ll notice here is that we’re doing it by month. The reason why we’re doing it by month is because this allows us to do more proper testing of our, of our plan, which we’ll talk about in a minute.
But if you’re not doing it this way, if you’re just putting in client A’s gonna be 60,000 for the year, client B will be 30,000. It becomes much more difficult to truly evaluate whether the plan we’re putting together will work. So now that then brings us to new clients. And so that should be the bottom half of the spreadsheet.
And when you’re thinking about new clients, obviously as you’re putting together the budget [00:19:00] at you know, in October or November or the forecast, you may be able to identify specific clients, right? So you may have clients X, Y, and Z that you know are in the pipeline, and you think this one’s gonna close in, January and be 12 a month.
You think that client Y will close in February and they’ll be 10 a month, right? And then client Z, you know, you also think that they might close in January and say they’re at five a month. Okay? So you can start putting in actual named prospects based on the conversations that you’ve been having. But then you may also need to just put in some placeholder ones, you know, new client one, two, and three.
And so then you need to figure out, okay, when am I gonna close this business? And one of the mistakes that I see people make is they will say, okay, you know, we think that next year we can grow revenue by a hundred thousand dollars a month. [00:20:00] And that’s by getting 10 clients at $10,000 a month. So, so what they then do is they put in all of these clients, and they put them in because they’re not doing this monthly spreadsheet.
They’re putting them in as a hundred thousand dollars, or, sorry, $120,000 each, right? So 10,000 a month times 12 months, 120. But that would then mean that in order to get there, all of that business would have to close in January. That’s incredibly unlikely to happen. Your wins are typically spread out over the course of the year.
So what you need to do is, instead of putting them all in here in January, maybe you put one there, but maybe you, you don’t start the other one here until Q2. So maybe what you’re doing is you’re assuming that you get, you know, one client, one new client a quarter. Okay, so that becomes a more reasonable plan for figuring out where the revenue falls.
And obviously if you get a new client at 10,000 a month in January, that’s $120,000 for the year. But if I don’t get them until June, it’s only 60,000. And so that makes a [00:21:00] huge difference in what your annual revenue projection is. And these are things that are much easier to see when you start putting it into this kind of a monthly spreadsheet.
And so that’s why I encourage folks to start there. And so that’s one of the first things that you need to do in order to start building this out. And you want to think about how you put all this together so that it is logical for you. And then what you need to do is you need to start thinking about how you test this.
And so you build this out and it, and it’s your first attempt at it, and you need to, to ask yourself some questions about what you’ve put on this spreadsheet. As you look at it, you need to ask yourself, can you actually close that number of accounts in that time period? And it becomes a lot easier to do when you start putting it in month by month.
Because if I say I’m gonna have six new clients in January, well that obviously starts to say particularly if you’re putting this together in October/November, you should know if you likely have six clients who are gonna start on January [00:22:00] 1, and if you do, great, you can put them down from a sales perspective.
But I want to to hit pause there because you also need to think about not only is this realistic from a standpoint of can you go out and close the business, or whomever in your agency is helping you to win new clients. It’s not just whether you can win the business, it’s whether you can onboard the clients and deliver the results that they’re looking for.
Because most small agencies can’t take on a bunch of new clients all at once. In fact, a lot of the agencies that I work with would struggle to take on more than one major client at a time. And so you need to think about what’s the reality of your situation? Do you have the bandwidth amongst your existing team members?
Would you need to recruit if you’re going to bring on a new client? Would you need to have contractors lined up to help you? Those are the important things to consider as you’re putting together your forecast. And I know some of you will push back and say, but I’m talking about revenue. I need to focus on that and then I’ll, it’ll be happy misery, as my old business partner used to say, happy misery.
We can [00:23:00] figure out how to, to meet the client needs if we’re able to be fortunate enough to close those contracts. The problem with that is that you can then end up with a situation where you’re not able to deliver on the expectations that your new clients have. And that is not only a short term risk to revenue because they may not last.
They may turn over more quickly than you would think, but it’s also a potential reputational risk for your business if they say, Hey, Chip promised he could do this, but they just didn’t have their act together. They couldn’t even manage to, to schedule meetings in a timely fashion or respond to emails in a timely fashion.
So really be conscious of that when you’re putting together your revenue forecasts to make sure that your client service team can deliver on whatever you and your business development team are doing to produce these new clients. You also want to think about how these numbers compare to the past. And so one of the things that I encourage agencies to think about doing is putting together a line of best fit.
[00:24:00] So what is a line of best fit? So this is a graph here. And so let’s put this in. And this would be, let’s see, 2018, 2019, 2020, 2021, 2022, and then 2023. Again, I apologize for my atrocious handwriting, but there’s nothing I can do about it. And then on, on this axis, we have revenue. So let’s say that, you know, my revenue looked like this in 2018, and it went up in 2019, and then because of the pandemic, it dipped down pretty substantially.
But then like many agencies, we got the rebound towards the end of 2020 that really showed up in 2021. And then we started, you know, we really started kicking off up here. . And so now you know we’re gonna figure out where we want to go from here. And so line of best fit is something that you can have Excel do for you, but what you, what it’s typically trying to do is trying to find, you know, where that line is that shows the trend of your revenue.
And so it tends to discount [00:25:00] anything where it goes, you know, particularly high or low on the chart and tends to find the middle ground. And obviously in my random example here, I didn’t do a great job of putting anything up high, but let’s, let’s for fun say that this one was way up here. You know, this would still help get you that line of best fit, right?
And so it discounts this really big year, this, this really small year and gets you there. And so now if I’m looking at 2023 and I’m either putting a, a revenue number down here or a revenue number way up here off the page, even, it’s a warning sign that you need to think about why am I deviating from this line so much?
And that’s something to think about as you are looking at your forecast and, and say to yourself, how does this stack up against what I have been doing? And if it is a big change up or down, why? Make sure that you have a good understanding of, of why those numbers are changing. Because that spreadsheet that I suggest you start with, It’s not the end point because you can still be overly [00:26:00] optimistic or overly pessimistic when you’re putting that together.
You want to make sure that you are then testing it against these other things. Make sure that you’re sharing it with other members of your team and getting them on board with what you’re forecasting. Let them tell you, geez, I don’t think we could actually add that many clients all at once. Or they might say, but you know, you’ve missed out on these things to include.
We’re talking to prospect X and prospect Y who might close sooner than you think. Maybe we should be thinking about that. Maybe we should be planning it in there. So try not to do this in isolation, even if you’re a small team, you should have all of your team members involved to one degree or another in your business development planning.
And that means that they’re also contributing to your revenue forecasting. And as most of you know, I’m a big believer in being pretty transparent with your team, particularly any mid to senior level team members, because the more they understand about the directionality of the business, the more they can truly contribute to what you’re trying to do.
So make sure that you’re [00:27:00] taking that, that detailed spreadsheet as a starting point. Make sure you’re doing the reality checks on it, but then also take it and, and look at it. What does it look like in the big picture? And is there anything there that would suggest that you need to rethink some of the assumptions?
Now with this spreadsheet, what you’re able to then do is you’re able to do that reforecasting that I was talking about previously. So what you can do is you can go in there and for the first quarter you can go in and look at what the actuals are and compare it against what you had forecast. And that may then help you more accurately reforecast the rest of the year.
For example, let’s say that you had Prospect X as closing in January, but they didn’t close in the first quarter. Are they still out there? Could they still close in the second quarter? Or should you write off all of their revenue for the rest of the year and say, okay, you know, we’re not likely to get that.
So do we have other prospects in the pipeline? Do we have unnamed prospects that we think we can still win? What’s the status of things so that we can make a [00:28:00] more accurate reforecast and then get ourselves back on track for understanding where that revenue is headed? Because you need to know not just where you want to go with the revenue, but where you’re likely to go, because that helps you to figure out how to invest most appropriately in the resources that your agency needs in order to achieve those revenue goals and also deliver the results that clients expect when they’re paying you that money.
So finally, before I move to q and a here, I do want to talk about comparing yourself to other agencies. And one of the questions that I get quite often is, you know, what are some good benchmarks to look at? How should I be comparing myself to other agencies? You know, what are similarly sized agencies doing for revenue growth and those kinds of things.
And so, you know, while there are, you know, sort of rules of thumb that you can use for different things, and I’ve talked just in this very presentation, about 20% being a typical profit margin target that you’d be looking for if you were a really strong, well-managed agency, [00:29:00] it does differ from one agency to another.
And so I would say you want to be really careful about spending too much time trying to compare yourself to what other agencies are doing. Particularly when it comes to a, from a revenue standpoint, because we often see revenue numbers out there. And if you are a PR agency, you might see the reports that are put in PR Week or O’Dwyer’s and it talks about revenue and revenue growth and headcount.
And those are all things that the agencies are self-reporting. They are vetted to one degree or another. But for example, if they’re reporting revenue, they typically are not reporting profit. So for all you know, they are an agency that is generating hordes of revenue, but are poorly managed and therefore don’t generate much profit for the owner or owners.
Is that the kind of business that you want to have? I would argue probably not. If you look at things like revenue per employee, which is another benchmark that people like to use, if you look on O’Dwyers, for example, and you look at the, the small to [00:30:00] mid-sized agencies on their list, the revenue per employee varies dramatically from one to another.
And that doesn’t necessarily mean that one is better or worse than another, but it means that some things are different perhaps with their business model. Particularly these days, a lot of agencies use a lot of contractors to get work done. That tends to drive down their, their employee headcount, which can drive up their revenue per employee.
But that’s more related to their model than the fact that they are actually running a more profitable, sustainable business. And so without knowing all of the facts, you’re in a very difficult position to try to compare yourself to these other agencies based on these public lists. Even if you’re talking with someone and they tell you, well, you know, we’re a, we’ve managed to do $5 million this year, or $2 million last year.
That’s nice, but they’re not really sharing, first of all, you’re taking their word for it. And my experience is that people tend to round up, shall we say, when they’re sharing their own revenue numbers or headcount numbers. There’s a [00:31:00] natural tendency for smaller agencies to want to appear bigger, particularly to prospects, but even to their peers.
And so you need to understand that you don’t have the full understanding of what that agency looks like. And some agencies in those comments will be including revenue that is non fee based. So these days, a lot of agencies are running paid advertising for clients. Even if it’s just search engine advertising.
Even PR agencies are now getting into this. And so in some cases that revenue may pass through the agency. And so the, the agency may include that if they’re talking with their peers and saying, we’re a $5 million agency. Well, maybe 2 million of that was for reimbursement for Google Ads. And so in a typical one-to-one comparison, you wouldn’t be including that.
And so I would certainly advise that agency not to think about that as revenue because that’s just passed through money, and they need to think about fee-based revenue as what their real “size” is. So think about [00:32:00] these things and understand that if you want to start comparing yourself to other people, you need to find people who are very similar to you. They’re, they have a very similar structure. They have a very similar target. They’re in a very similar geography. That’s one of the areas where revenue per employee can vary dramatically. A New York City agency has to have a very different revenue per employee number to work and generate reasonable profits than one based here in Concord, New Hampshire.
It’s just fundamentally different costs of living and different costs for the employees. And so you need to factor that in if you’re going to be doing comparisons, because otherwise you end up with apples to oranges instead of apples to apples. So if you truly want to get into benchmarking, you need to find people who are very, very similar to you.
And the reality is that’s not easy to do. And so what I always encourage and, and part of the build to own philosophy that I promote is that you need to focus more on what is right for you. What are your personal targets as the owner or if you have partners [00:33:00] for you and your partners? What are you trying to achieve in terms of compensation?
Both salary and profits from, drawn from the business. What are your goals in terms of the kind of work that you’re doing and what are your goals in terms of the amount of work and the flexibility that you have? If you achieve those three things, then the actual amount of revenue that you have or even the profit margin that your agency has is of lesser significance.
It’s not irrelevant. It matters. It’s part of building and growing a healthy agency. But it, it plays a secondary supporting role rather than being the focus. And so I would encourage you, as we’re wrapping up today, to think about revenue not as the overarching goal that you should be looking for, but instead think about it in terms of part of your planning process and make sure that you’re thinking about not just top line revenue, but also profitability and the ability to deliver results.
If you’re tying all of those things together, you’ll be in a much stronger position [00:34:00] in order to really understand where your business is headed, to make adjustments to where your agency is going, and to get the results that you need and that you want and that you deserve as the agency owner for the risk that you’re taking and for the work that you’re putting into it.
So, that will draw to an end the formal presentation portion of today’s webinar. We’ll be moving into q and a for live participants. And so if you haven’t already done so, feel free to use the q and a function at the bottom of the screen to submit any questions that you may have, and I’ll answer those for the live audience here in a minute.
If you’re watching on replay, as I mentioned before, you can email me at email@example.com and I’d be happy to try to answer your questions or by all means, join the Slack community that we have for agency leaders and you can ask your questions there and good feedback, not just from me, but also from other agency owners and leaders.
And so again, if you’re watching on replay, this concludes that. And in just a moment, I will, uh, start the q and a after I’ve [00:35:00] grabbed a sip of water.