#122 - How to manage costs in agency life - Lee Jackson

Being profitable is not always about selling more and gaining more clients. In this workshop we talk through basic cost management and how we keep our finger on our financial pulse to make informed decisions and ensure we have a good balanced approach to work and play.

PROFIT AND LOSS

It is essential to know the current state of play. What do you have coming in? What is going out?

This allows you to:

Understand your business as it currently isPredict the next 12 months of operationSee where you can make savings to increase profitsBe pre-warned of any upcoming rough monthsRemoves the guess workBe purposeful in your planning

Knowing your business allows you to make relevant decisions in both spending and in cutting costs.

Resources:

Bookkeeping Master SeriesCatewayCFO – Financial ProjectionProfit and Loss TemplateOur own P&L Template

CREATING A BUDGET

Without a clearly planned budget, you are going to be making purchasing decisions blindly. Planning purchases, SaaS subscriptions and new hires based on what is in the bank at any one time is inefficient and likely to bite you on the behind.

The steps to creating a budget can be broken down into:

Add together all your incoming revenue channels (grab your P&L)SalesAffiliate incomeAnd so onRecord all of your regular costs (grab your P&L)RentSalariesInsurancesSoftware licencesEtcSet a prediction for variable expensesFor example costs that are less predictable like contractorsEstablish any up-coming one-off purchasesNew laptopUpcoming compliance consultancyFinally get all this information in one place, keep it updated and review it regularly

Freshbooks have put together this fantastic article to get you started.

GETTING ADVICE

If you are either struggling to get the data together, or are not sure how to read what you see, then consider getting in help. We often can’t see the wood for the trees. It’s very easy to miss things in our calculations. Equally without financial experience, we may misinterpret what we see.

Despite running financial data in agency life for years, I still lean on my accountant for regular advice and to sanity check my planning and my predictions. It pays to have an expert on board.

SUMMARY

The keys to cost management are

Knowing what you are earning and spendingEnsuring your spends are worth while and have valueHaving planned budgets and sticking to themSeeking regular advice

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OUR EVENT:

Do you want to make real change in your business? Join us at our in-person event Agency Transformation Live

Meet Troy Dean; Lee Jackson, Chris Ducker, Kelly Baader, Amy Woods, Paul Lacey, Dave Foy and other legends in this fantastic conference focused on actionable steps that you can use to transform your agency.

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