If you are that agency founder that’s raising invoices at 11 pm on a Wednesday evening, then we’re sure you’ll take away a thing or 2 from our paper. Everyone knows being busy isn’t the same as being profitable. We’ve spent eight years doing the finances of RevOps agencies and there’s a version of this gap we see across almost every agency we work with.
Look, we get it – as services businesses go, things aren’t super rosy at the moment. Sure, some things are changing and there is positive news but for the vast majority of us it feels like the finish line is constantly moving. Our paper here deals with the messy reality of agency working and what finances actually look like. Years of finance learning from working alongside the founders of these companies condensed into a whitepaper will have something in it for everyone.
It’ll be live soon. But a summary of what it covers is here.
Which stage of growth are you at right now?
Agency growth doesn’t happen in a smooth line – it never has. It moves in stages and each stage comes with a different version of the same problem: managing your finance function with habits built for where you were, not where you are now or going. The founder invoices clients at 11pm on a Wednesday night because there’s no one else to do it. The growing agency is still not sure whether last quarter’s projects were actually profitable. The team where everything looks fine until someone asks a question you can’t confidently answer. We’ve seen each of these and knowing which stage you’re at is usually the most useful place to start.
Why revenue is harder to track than it looks
RevOps agencies typically run three to four revenue models at the same time: typically retainers, fixed-fee projects, time and materials based billing and platform commissions. Revenue recognition can be tricky even without the accounting requirements added on top. When revenue is recorded at the wrong time or a project is invoiced without it being in tandem with delivery or platform commission included before it’s confirmed, the P&L can look great but the cash won’t. It’s one of the first things that surfaces in a due diligence process and one of the most common things we’re asked to unpick.
The four costs that are cornerstones of all agencies
Simply speaking these are people costs, subscriptions including AI subscriptions, marketing spend and travel. Most agencies can name these. Fewer have a real number across all four, particularly once you add contractor costs, tools that renew annually and marketing budget spread across different people’s expense reports. Most agencies find out what it’s costing them when they’re trying to work out why a healthy revenue figure isn’t showing up in cash.
How the numbers tend to go wrong
There are a number of reasons for something to go wrong.
- Something as simple as revenue on the wrong date.
- Single person points of failure for invoicing or AR follow ups. S
- Scope creep that is understood too late to do anything about.
- Deals priced without the delivery team being involved.
These aren’t unusual failures; they’re what happens in almost every agency that hasn’t built controls around how it earns and spends. None of them is hard to set right. But they tend to compound if left unfixed.
Project profitability
If someone ran a project-level profitability report on your business this week, would the numbers make sense? If the real answer is uncertain, that’s usually a good place to start with the systems. It doesn’t mean the business is in trouble. It usually just means the numbers haven’t been set up to tell the full story yet.
The whitepaper is coming
We’ve pulled together a full finance function guide for RevOps agencies, covering revenue recognition, AR and AP frameworks and a self-diagnosis of where your finance function stands. It’s not live yet, but sign up below and we’ll send it straight to you when it is.
Sign up for the whitepaper: https://share-eu1.hsforms.com/2-miEXE3aR_WF3R40dEtbVA2ghp5c
If you’d rather talk your numbers through now, book a clarity call with us.
Book a clarity call: https://evalua8.com/contact/
Note: This article is for information purposes only and does not constitute financial or tax advice. Please consult a professional for advice specific to your situation.
