How much do you share about your overall business performance with your team?

As agency owners, discussing profit openly with our team can feel uncomfortable. Yet this transparency is crucial, not just for us as owners, but for the entire team's understanding and motivation. Profit, after all, isn't solely for shareholders. It's a safeguard during times like Covid, funds for service-related development, and it’s a resource for team investment – be it in training or recruitment.

During Covid, Tank managed to navigate its way through without redundancies and it continued to grow. This resilience was a direct result of retaining profit within the business. We told that story to our teams, and they now have a better understanding of profit as a vital measure of our agency's health.

By framing profit in a strategic, transparent manner, we (as owners) engage the right people in our teams to work towards shared goals and profitability.

Gross Profit: A Unifying Measure

We've adopted Gross Profit as the shared success metric across the group. It's a figure everyone influences, understands, and it encourages business-minded thinking. This metric considers the cost of available service hours, the revenue the team should be able to work on, and any under or over-achievements can be used as a measure of a team’s efficiency.

Departments have varied Gross Profit targets, depending on their size and structure. Yet, irrespective of expansion or downsizing, the gross profit percentage remains a reliable efficiency and financial performance gauge. In essence, delivering 100 hours of billed work in 100 hours hits their target. Delivering that work a touch faster (more efficiently) results in a higher gross profit, and vice versa.

From a board level, we know that our gross profit target will deliver what we need to keep the business healthy, continue to invest in areas that support growth and top up our reserves for unforeseen challenges. We also know that it will allow for a modest dividend as well as enable us to reinvest back into team salaries. Win-win.

Since embracing this open approach, our Gross Profit percentage has increased by [15]% and team efficiency has improved by [15]% compared to last year. This level of clarity in goals and financial performance has unified our team, resulting in stronger collaboration and better solutions to cross-departmental challenges.

What About Net Profit?

At the senior leadership level, we're transparent about net profit too. We aim for over 30% net profit to facilitate continuous investment and growth, including acquisitions. As shareholders, we're satisfied with the remaining profit, knowing the business is thriving and secure.

Final Thoughts

Transparency around financial measures, particularly around profit, has not only enhanced our productivity but also created a culture of collaboration and shared success. It's a strategy I highly recommend to fellow agency owners.