Case study · Saatchi & Saatchi · 2013-2014

Half the agency's margin came from business I had won

Communications agency · business development and margin management · Indian Ocean · 2013-2014

Illustration: a balance with a stack of orange files on one pan and the rest of the business in grey on the other

A marketing director knows how to spend. The question nobody asks in an interview is whether they know how to bring money in. In my case the answer sits in a commercial tracker closed at 31 August 2013, which was the basis for the following year's budget.

Over the year, the new business I won accounts for 51% of the agency's gross margin. Against a volume of lost business fifteen times smaller. The annual gross margin target, set at the start of the year, is beaten on the closing projection.

The following year's gross margin budget is built on a 10% increase, backed by committed business, not on a presentation ambition.

01 · Context

A communications agency in an island market, with a portfolio of large international brands and major local accounts. An agency's economics fit in one line: gross margin, meaning what is left after media buying and subcontracting. Everything else, salaries included, is paid out of that. I was digital marketing director and then partner-director there, with the double job of running a division and bringing in business.

The constraint

In an agency, business development is done by the same people as production. Every hour spent pitching is an hour not serving a paying client. Add a closed market where advertisers can be counted, where everyone knows everyone, and where losing a pitch is common knowledge within the week. And the underlying constraint: on an island market you do not make up a lost account with volume, because there is no volume.

03 · The system

1 · Keep the account, not the impression.

A monthly commercial tracker with realised sales, realised gross margin, business committed to date and the year-end projection. Without it, an agency discovers its year in November. With it, it makes its calls in June.

2 · Separate won from lost, and look at both.

The tracking does not only count the business won. It also counts the business that left, and for how much. The ratio between the two tells you whether development is holding or running out of breath, long before revenue shows it.

3 · Sell margin, not volume.

A file with a big media budget and a thin margin ties up a whole team for nothing. The sorting was done on the expected margin rate, not on the headline size of the budget. It is the least popular decision to make in an agency, and the only one that keeps it alive.

4 · Build next year's budget on what was delivered.

Two versions of the business plan circulated, one at +24% and one at +10%. The second was kept and written into the commercial tracker, because it was backed by business already committed. A budget you cannot justify line by line commits no one.

5 · Make business development a job, not goodwill.

New business does not fall from the sky, it is worked: a list of target accounts, meetings provoked, written proposals, and a conversion rate that someone watches. This work is a trade, and it is not left to the luck of referrals.

04 · Results

2013 financial year, closing projection and 2014 budget.

51% of the agency's annual gross margin brought in as new business
Lost business fifteen times smaller than won business over the same year
Annual gross margin target beaten on the closing projection
Following year's budget built on a 10% increase, backed by committed business, against a +24% version that was dropped
Monthly commercial tracking with realised sales, realised margin, committed and projected

05 · What it proves

A marketing director who can only talk about spend is half a leader. Knowing what you bring in, at what margin, and being able to show it month by month, changes the nature of the conversation with a board. If your marketing is only ever described in budget consumed, nobody will know what it returns.