WORK

MAA_Rates

The MAA reports that average hourly rates for member agencies have fallen by 20% in ten years. According to our industry’s financial gurus at WKS a well run agency should aim for 25% net margin; few agencies can manage this but let’s just say you’ve been aiming for 20% margin then one of a few things must have happened in the last 10 years – either a) agencies are no longer making any net profit at all, b) they made huge profits before and are now making a bit less, c) they’ve improved efficiency by 20%  or d) they’ve reduced costs by 20%. I suspect it’s a combination of all the last three.

 

When I look back at our rates we haven’t reduced them by 20% but what I have noticed is that the differential between our rates and our competitors’ has reduced as their rates have come down. What this tells me is that other agencies have at last woken up to the obvious reality we’ve always known which is that you have to run an efficient agency offering value for money at realistic rates to prosper. In fact our industry is no different from any other avenue of commerce. The fact is we agencies have to mould ourselves around our clients’ business model and financial constraints, and if we don’t clients will rightly look elsewhere. If you’re in FMCG or retail, as we are, then you always have to be looking for ways to offer more for less, improving efficiencies and finding ways to reduce your cost base.