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DBA Members’ Forum | May Summary

In our May DBA Members’ Forum we discussed financial benchmarking, bringing together expert advice and drawing on some in-agency examples. Here’s a summary of the conversation.

Key metrics highlighted were:

  • Staff costs to fee income ratio at no higher than 60-65% (with approx. 20% on overheads, leaving you with 20% profit) This has fluctuated over the years, with hybrid working potentially lowering overheads to 15%, meaning you can spend up to 65% on staff and still make a decent profit, but like most ratios work out the best balance for your business.
  • Break-even point – how much income do you need to cover your overheads – plus your target – then you can see clearly what you need to convert from the pipeline.
  • Utilisation rates – how much time is spent on billable work by each person in the business? 
  • Recovery rates – how much of actual billable time is billed to a client. This is a real warning flag metric – the canary down the coalmine. Not billing enough here will drag profits down throughout the business. Do you know what this looks like in your business? There are many reasons for low recovery rates. Improving them adds directly to your bottom line. More guidance here.
  • What do the next 90-days look like? Booked revenue needs to be accrued over the time you’re going to complete the work. Looking at the next 90-days will mean you can plan to have the resources to cover the confirmed work, or make appropriate decisions if you don’t have the work in.
  • Working out your liquidity ratio – having around 3-4 months of committed overheads in the bank is a good place to be.

 New business and your pipeline

  • We know from the Annual Survey Report that clients are taking longer to commit to projects – this in turn has led to businesses needing more potential in their pipeline to convert to the number of live projects needed.
  • One expert uses a strength test of confirmed work plus prospects being around 10 x monthly costs – this shows a business is working reasonably hard to win the next project.
  • Setting new business targets should be done on an individual business basis to encompass the nuances around repeat clients.
  • One member shared that they’ve tracked the various conversion stages throughout the pipeline and that’s helped them to see where they need to focus on. 

Benchmarking against other design businesses

  • Benchmarking staff salaries, hourly rates, utilisation and recovery rates were all highlighted by members as key aspects of the DBA Annual Survey they use often in their businesses.
  • It can feel isolating running a design business, the data in the report helps you to feel like you are not operating in isolation – to be able to benchmark against the industry is invaluable to running the business.
  • The DBA Annual Survey is open now for you to add your data – don’t miss this chance to contribute. The more members that take part, the more representative the survey is. And the only way to get hold of the exclusive online comparison website is by taking part. If you need more information or are struggling to access the survey please contact Christina Warren for your unique survey link.

There was much, much more covered in the hour – I hope you find these notes helpful. Join our next meeting on Monday 3 June, 4-5pm BST, look out for an email with the details in a few weeks.

We’ve captured the conversation highlights from the all the Members’ Forums which have taken place and they can all be found here.


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