Running a digital agency is all about making the most of your team and resources.
But how can you really tell if things are running efficiently?
One simple metric can reveal a lot: agency revenue per employee (RPE).
It’s more than just a number—it’s a window into how well your team is performing and how smoothly your agency is being managed.
Let’s dive into what your RPE says about your agency and how you can use it to make smarter decisions for your business’s growth.
What is Marketing Agency Revenue per Employee?
Simply put, revenue per employee shows how much revenue each employee generates for your agency. It’s calculated by dividing your agency’s total revenue by the total number of employees.
Typically, a higher RPE means your agency is operating smoothly, with each employee contributing significantly to the bottom line.
On the flip side, a low RPE can signal inefficiencies or indicate that your team isn’t being utilized to its full potential.
How Efficient is Your Digital Agency?
According to Promethean Research, the average digital agency made $172,000 per full-time employee in 2023, a number that has been steadily climbing since 2015. This means that for every $172,000 in revenue, an agency typically has one full-time employee.
Compare that to just $135,000 per employee 10 years ago, and you can see how much more efficient agencies have become.
Why the increase? A big part of it is technology. With AI tools now handling routine tasks, agencies can get more done without adding as many new hires. This trend is likely to continue, making teams even leaner and more productive in the coming years.
But just focusing on the numbers can be misleading. For instance, a high RPE might look good at first glance, but if it’s driven by overworked employees or low client satisfaction, it can lead to burnout and turnover—costly problems in the long run.
That’s why it’s important to look beyond RPE alone and consider other factors that impact your agency’s overall efficiency. Here’s what to keep in mind:
- Compare with similar niches: A digital marketing agency that focuses on SEO might have a different RPE than a full-service advertising agency, simply because of the varying complexity and pricing models of their services.
- Employee workload: It’s easy to see a high RPE and think everything’s great, but if employees are stretched too thin, this can lead to burnout. According to a survey by Indeed, over 50% of employees have experienced burnout from overwork, which eventually leads to turnover—dragging down your RPE in the long run.
- Project complexity: More complex projects will naturally take more time and resources, which can lower your RPE. The key here is to ensure your pricing reflects the complexity of the work you’re delivering.
- Profit margins: A high RPE should ideally correlate with strong profit margins. If not, it could mean that your costs are too high or that revenue isn’t translating into profit effectively.
- Client satisfaction: If your agency keeps a high RPE while maintaining strong client satisfaction and retention rates, this is a solid sign that your team is operating efficiently. However, if quality slips due to overworked employees, you might see a drop in client satisfaction over time.
- Technology and AI: Leveraging AI and automation can improve efficiency by streamlining repetitive tasks, freeing up your team for higher-value work. But remember, efficiency should never come at the cost of quality.
Hiring Tips to Boost Your RPE
Once you understand your RPE, you can use it to guide your hiring strategy. Here are a few practical tips to consider:
- Don’t Hire Hastily: When things get busy, it can be tempting to hire quickly just to keep up with demand. But rushed hiring decisions can lead to bringing on employees who aren’t the right fit, which affects productivity and ultimately your RPE. Plus, turnover and training take time and resources away from your current team.
- Leverage Technology and Outsourcing: Automating routine tasks and outsourcing smaller jobs can help you get more done without having to hire more people. Using AI tools can also help your team work faster and more effectively, allowing you to keep your team small while still being productive.
- Supplement your team with International Talent: Integrating international support to compliment your US team can be a major unlock. I’ve seen this drive significant efficiency gains and allow your key team members focus on higher level revenue generating functions.
- Invest in Employee Growth: When your team gets the chance to learn new skills, they feel more confident and are more likely to stick around. Giving them opportunities to grow doesn’t just keep them happy—it also means they can take on bigger projects and help your agency run more smoothly. It’s a win-win: your team feels valued, and your agency gets stronger.
Increase Your Digital Agency’s Revenue
Getting more revenue per employee isn’t just about hiring smart—it’s also about making your agency run as efficiently as possible.
This could mean bringing in bigger clients, making sure your prices match the value you provide, and building strong relationships so clients keep coming back. With so many factors to manage, it can feel overwhelming.
That’s where we come in. Whether it’s bookkeeping, handling taxes, or offering financial advice, we’re here to help make things easier.
If you could use an extra pair of eyes across your digital agency’s financial & operational strategy, we’d love to see how we can help.
Simply use the calendar below to book an introductory call to chat with our team.
Until next time!
