I recently had the pleasure of spending a morning with Otto Stevens from Waypoint. As the former CFO of iris Worldwide, Otto knows a thing or two about growing profitable agencies so I was keen to understand his thoughts on new business. I particularly liked what he had to say about ROI so asked him to share his views on here:
It seems curious to me that not many agencies have definitive outcomes to measure the return on investment (ROI) in new business.
Now when I say new business I mean new business personnel, marketing and research costs, pitch costs. Many agencies when planning for the new financial year will realise that they have a gross profit gap that needs to be filled. You can get this from existing and new clients.
Why shouldn’t you measure new business in the same way as you measure the productivity of agency people? If you measure it, you can manage it.
- How effective is the new business attraction and conversion?
- Did the pitch costs justify the gross profit won?
- Is the new business director doing his/her job?
In my experience if your investment in new business is not returning gross profit on a factor of at least 6 times in 12 months then perhaps you should return to the drawing board.
Interested to know more? You can contact Otto here or, if you are thinking of going back to the drawing board, see me.