If you want to run a profitable agency, there’s one critical step you can’t skip: creating a budget. It might sound simple, but many agency owners overlook this essential process. Without a clear budget, you’ll struggle to control costs, set financial goals, or track your progress—all of which are crucial for long-term success. Here, we’ll cover the basic steps to build a budget that actually works for your agency and sets you on a path to financial stability.
Step 1: Create a Monthly Budget
The foundation of financial management is having a monthly budget that outlines your income and expenses. This isn’t just a one-time task; it’s something you’ll need to revisit regularly as your agency grows and changes. Many agency owners make the mistake of running their business without a budget, and as a result, they find themselves constantly playing catch-up financially.
Your monthly budget should include the following key targets:
- Revenue Target: This is the total income your agency aims to bring in for the month. Setting a revenue target keeps you focused on generating enough sales to cover expenses and make a profit.
- Gross Margin Goal: Gross margin is the percentage of revenue left after deducting the cost of delivering services. This is a critical number because it shows how efficiently you’re operating. Aim to keep your gross margin as healthy as possible.
- Net Income Goal: This is the amount of money you want to have left after covering all expenses, including overhead, salaries, and taxes. Setting a clear net income goal ensures you’re not just covering costs but also earning a profit.
In addition to these financial targets, include lead generation goals and sales goals in your budget. After all, your income depends on your ability to attract new clients and close sales, so it’s essential to set targets for these activities as well.
Step 2: Share Your Budget with Your Leadership Team
A budget is only effective if it’s actively used and implemented by your team. Once you’ve created your monthly budget, don’t keep it a secret. Share the relevant parts with the leaders responsible for each area. This transparency helps each team member understand their financial targets and what they’re expected to achieve. When everyone on the team knows the numbers they need to hit, they’re more likely to take ownership of those goals and work toward them consistently.
Here’s how you can assign budget goals:
- Revenue and Sales Goals: These should go to the head of sales or the person responsible for business development. Their role is to bring in new clients and keep revenue on track.
- Gross Margin Goal: Your operations manager or production lead should be responsible for gross margin. They’ll monitor project costs, manage resources, and work to maintain efficiency without overspending.
- Lead Generation Goals: This responsibility often falls on your marketing team, as they’re tasked with generating leads through campaigns, content, and other initiatives.
- Net Income Goal: As the agency owner, you oversee net income. It’s your role to ensure that all expenses align with the budget and that profits are on target.
Sharing the budget with your team isn’t just about accountability; it’s about creating a sense of ownership over the agency’s financial goals. When team members feel directly responsible for the agency’s success, they’re more likely to go the extra mile to meet those goals.
Step 3: Review Your Budget Regularly
Once your budget is set and assigned, the next step is to monitor it consistently. It’s not enough to check in on your budget once a month or when there’s a problem. As the agency owner, you need to look at these numbers regularly—ideally, every day. This may sound intensive, but the reality is, “what gets measured gets done.”
A quick daily review of your key numbers—like revenue, gross margin, and lead generation—keeps you informed and allows you to identify any potential issues early on. If you see that leads aren’t coming in at the expected rate or that project costs are higher than anticipated, you can address these issues before they impact your monthly targets.
In addition to daily check-ins, make it a point to review the budget in each leadership team meeting. Go over each department’s goals, discuss progress, and tackle any roadblocks. These regular reviews help keep everyone on track and reinforce the importance of sticking to the budget. It also provides an opportunity for leaders to share their insights, which can lead to valuable adjustments that improve the agency’s financial health.
Step 4: Adjust as Needed
Creating a budget isn’t a one-time event—it’s a process. Your budget will need to evolve as your agency grows, client needs change, or new opportunities arise. As you review your numbers regularly, be prepared to adjust your budget when necessary. Maybe a particular service is more profitable than expected, so you decide to allocate more resources to it. Or perhaps lead generation is underperforming, and you need to invest more in marketing.
Adjusting your budget doesn’t mean you failed to plan correctly; it means you’re adapting to real-world conditions. Flexibility is key to keeping your agency profitable in a fast-paced, ever-changing market.
Final Thoughts
Budgeting like a pro isn’t complicated, but it does require discipline and consistency. Start by setting clear revenue, gross margin, and net income goals each month. Share these targets with your leadership team, track your progress daily, and adjust as needed. When you treat budgeting as a priority and involve your team in the process, you’re setting your agency up for financial success.
Remember, for more in-depth strategies on achieving financial health in your agency, don’t miss the upcoming Agency Freedom Live event. Get your ticket today at Agency Freedom Live and take the next step toward growing a profitable agency!