How do you compare against 100+ agencies?

The poll results are in!

The data is very interesting. Some of it confirmed what I expected and some of it surprised me.

I'm going to share the findings over the next few emails rather than dump everything at once, because each category deserves its own conversation. There's real insight hiding in these numbers and I want to do it justice.

Quick overview before we go deep on the first one:

Almost 40% of you are doing over $1M a year in revenue, which means the majority of the problems on this list are scaling problems. You've figured out how to get clients. You haven't figured out how to make the economics work as the business gets bigger.

The number one pain point, at 38.5%, was growth plateau. Nearly 4 in 10 of you feel stuck and can't figure out why. I have thoughts on this that I'll share in a later email - because I think most of you who picked "growth plateau" have a different problem underneath that you haven't identified yet. More on that soon.

57% of you are not tracking churn by individual account manager. 55% want tactical frameworks over everything else. And 53% have never worked with an agency consultant before.

Those are the headlines. Now let's get into the first deep dive.

Capacity forecasting:

47% of you have a capacity forecast that's updated regularly. 27% have something rough or outdated. And 27% have nothing at all.

So about half the list is in a decent spot and the other half is making resourcing decisions based on whatever their team tells them, which - and I say this with love - is almost always wrong.

There's research showing that people don't self-recognize available capacity until they drop below 40% busyness. Meaning someone working at 55% utilization will genuinely tell you they're slammed. They just can't feel the gap. And if you don't have a capacity forecast to check against, you take them at their word, you hire someone you don't need, and your profit margin drops for a problem that didn't exist.

So here's how to think about this depending on where you are.

If you're not tracking capacity at all and you're not time tracking either, the fastest way to get visibility is through DLER - Direct Labor Efficiency Ratio. Take the revenue that a department, pod, or the company as a whole manages. Divide it by the total salary cost of the billable staff in that group. That gives you a ratio. Your target is 3.33x or greater if your team is based in the US, UK, or Australia. If you're outsourcing to lower-cost regions, your target should be 4x to 5x or higher, because the labor costs are lower so the leverage ratio needs to be higher to maintain the same margin.

If your DLER is below 3.33, you almost certainly have a capacity problem, an efficiency problem, or both - and you definitely should not be hiring until you figure out which one it is.

If you are time tracking, here are the benchmarks I use across every agency I work with. Frontline billable staff should be at 80-90% billable utilization. The difference between 80% and 90% comes down to how structured their days are and how much project management support they have. If a project manager is assigning specific work blocks - four hours on this, four hours on that — people can hit 90%. If they're self-managing their time with less structure, 80% is more realistic.

Managers are different. If they're managing 3-4 people, 65% billable is reasonable. If they're managing 5-8 people, you're looking at mid-40s to 50%. Managing people takes real time. If your managers are at 80% billable, they're not managing - they're doing the work themselves and the management isn't happening.

Directors should be between 0% and 35% billable depending on the scope of their role. Account directors tend to be higher on that scale because client interaction counts as billable time and they're doing a lot of it.

If your frontline billable staff is consistently under 80%, something is wrong. Either the work isn't structured well enough, the team doesn't have clear enough direction, or there's a skills gap that's causing things to take longer than they should. Any of those is fixable. But you can't fix what you can't see.

If you're in the 47% already tracking capacity regularly, the question I'd ask you is: are you using it to make decisions? Because having a capacity forecast and managing against a capacity forecast are very different things. The forecast should be what settles the "we need to hire" conversation once and for all. If the DLER says there's room and the utilization data confirms it, the answer is no, we don't need to hire. We need to fill the capacity we already have.

Capacity forecasting on its own only tells you half the story.

You can have perfect capacity data and still bleed profit if you don't know which account managers are retaining clients and which ones are losing them. It doesn't matter how efficiently you deploy your team if the clients they're deployed against are walking out the door.

That's the next email. We're going to get into churn tracking by account manager - who's doing it, who's not, and why the agencies that aren't are almost certainly leaving six figures on the table without knowing it.

If you want to run this for your own agency right now, I built a capacity calculator you can use. Just make a copy, plug in your numbers, and it'll show you exactly where you stand.

Here's the link →

Nick