Profitability 101 for Ecommerce Agencies

If you've been following Agency Growth Events, it should come as no surprise that we're huge fans of Marcel Petitpas and his exceptional presentation skills. Once again, we had the pleasure of hosting Marcel Petitpas (Founder of Parakeeto) at our Ecommerce Agency Book Launch event, where he delved into his approach to maximising profitability and overcoming common pitfalls faced by digital agencies on their growth journey. This time, he focused specifically on the Ecommerce services field.

As the Ecommerce space continues to thrive and more agencies shift their focus to the Ecommerce niche, those selling websites and marketing services to Ecommerce brands may be feeling the pressure of increased competition. The rapid pace of the technology ecosystem, brands' growing in-house capabilities, ever-changing advertising algorithms, and the rising cost of talent all contribute to this challenging landscape.

For the aforementioned reasons, prioritising profitability is crucial for your agency. However, it's important to note that while you may already have some understanding of your profitability, the information you possess is likely fragmented. A quick guess… You know how much revenue you took in last year, and you know what was left over in the end. But what happened in between? Where did all of that cash flow go?

In his latest appearance, Marcel takes us through a high-level overview of how you can structure your Ecommerce agency finances to give you the insight you need on a more consistent basis while also showing you operational levers that you can use to control profitability. Here are the highlights and key concepts from Marcel’s speech, structured around formulating ‘A Baseline Structure for your Agency Financials’ and unlocking ‘Operational Insights through Delivery Margin’.

• Revenue

• Pass-Through Expenses

• Agency Gross Income (AGI)

• Delivery Expenses

• Delivery Profit

• Overhead Expenses

• Operating Income

• Time Lag

• Cost

• Actionable Insight

• Average Cost Per Hour (ACPH)

• Average Billable Rate (ABR)

• Utilisation

In sum, when it comes to measuring and improving your agency’s profitability, it’s actually a lot simpler than you might think. It all comes down to measuring just a few important metrics, as pointed out above. By focusing on these simple metrics, you and your team can gain significantly better insight into what’s driving performance and what opportunities to focus on in order to improve performance. What’s more, is that you’ll be able to get those insights quicker and without relying on the finance department to get them to you. Here’s how to get started with Parakeeto’s Agency Profit Toolkit!