This episode distils the six most important financial KPIs PR agency leaders should track, with Rachael Marshall, founder of specialist accountancy firm Magic Digits.
Market context
Rachael describes the current PR agency landscape as highly competitive and uneven: some agencies are “absolutely flying” while others are under real strain from rising costs and longer times to land business.
“It’s been a rough year (for PR)… it’s a really mixed bag at the minute.” – Rachael [0:02:26]
1. Cost of Sales (~30% of turnover)
Third‑party delivery costs (freelancers, client‑specific software, etc.) should sit at about 30% of turnover. Higher levels can work for project-based agencies only if those costs are correctly rebilled to clients.
“Anything you can do to rebill any of these third‑party costs is going to increase your revenue.” – Rachael [0:06:10]
2. Staff Cost Ratio (50–60% of fee income)
Direct, billable staff (including employers’ NIC, pensions, and proportionate directors’ salaries) should be 50–60% of fee income.
- Below 50%: team likely overstretched and near burnout.
- Above 60%: usually a pricing problem or inefficient structure.
3. Gross Profit, Overheads and Net Profit
A 40–50% gross profit gives agencies the “oxygen” to operate without constant stress.
“If you’ve got a healthy gross profit, everything’s easier… if it’s not, everything’s harder.” – Rachael [0:16:32]Overheads should be around 20%, leaving room for a target net profit of 20% (though many are currently at 5–15%).
4. Cash, Debtor Days and Resilience
Rachael recommends three months’ cash reserves plus the next corporation tax bill, with debtor days ideally 30–45. She underlines that:
“Profit doesn’t equal cash… it matters what you’ve got in the bank to pay people.” – Rachael [0:29:45]Mais episódios de "PRmoment Podcast"
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