THE SECOND WIND SA M PL E 2012 Annual Agency Survey Report December 18, 2012 Dear Second Wind Member, Following are the results of Second Wind’s 2012 Annual Agency Survey. PL E This survey allows you to compare your data with the average data of other Second Wind members. This is the most complete survey of smaller to midsize agencies that exists today. It’s one of the reasons your membership in Second Wind is so valuable. The survey is a wonderful agency management tool, immediately pointing to areas where your operation is strong, and where it may need improvement. In the past, some of our members have put this data into spreadsheets, aligned these results with their own numbers, and developed this information into useful analytical tools. SA M Remember, different isn’t necessarily bad. If your data is not in line with the average member’s, you are not necessarily doing things all wrong. If you have concerns that you would like to discuss, feel free to call us. We received 115 responses to this year’s survey questionnaire—approximately 15% of the total Second Wind membership. We thank all of you who responded for providing their data. To those who did not respond—but who clamor for the results (you know who you are)—we look forward to your participation in the 2013 Annual Agency Survey. I hope this survey report contributes to greater profitability for you in 2013. If you have any questions regarding this information, please call us at 610-3749093 or email: [email protected]. We will do our best to clarify any issue. Very truly yours, Tony Mikes Managing Director 2 2012 ANNUAL AGENCY SURVEY 3 grew from 52.2% to 68.6%; digital and Internet grew from 67.1% to 73.5%; and PR grew from 74.9% to 80.3%. Some notable decreases include online media, which dropped from 16.9% to 11.8%; account service, which declined from 91.2% to 88.3%; and creative, which dropped from 87.7% to 81%. Total AGI increased marginally from $2,030,403 to $2,045,710 and capitalized billings were reported at $13,644,886. Overall, 2011 was a year of marginal growth but it’s a step forward for an industry battered by the recent economy. The financial data reported in Second Wind’s 2012 Annual Agency Survey shows that agencies experienced some level of recovery after a difficult 2010. Average total billings increased slightly from $4,299,529 in 2010 to $4,394,533 in 2011. SA M Several billings areas increased, with online media growing from $187,065 to $259,926 and creative increasing from $681,145 to $808,370. Traditional media also experienced a small bump, increasing from $1,335,426 to $1,406,936. Several decreases were noted, with account service dropping from $625,174 to $545,641; PR fell from $213,477 to $191,259 and account planning decreased from $197,983 to $178,190. While none of these decreases were overly significant, they represent the shifting of client budgets as things begin to pick up speed in our industry. Total direct costs were up slightly in terms of dollars and as a percentage of total billings, reported at $2,348,823 representing 53.4% of billings. This compares to $2,269,126 and 52.8% in 2010. Margins changed slightly from last year, with traditional media experiencing an increase from 8.1% to 12.8%. As several other margin levels are declining, it’s good to see agencies increasing their media commissions again. Other increases were in account planning, which 4 2012 ANNUAL AGENCY SURVEY Business expenses remained in check, showing a slight decrease from $655,861 to $613,778. Total operating expenses also decreased from $1,689,170 to $1,624,059. This has been the trend for the last few years, as agencies work hard to remain profitable by cutting unnecessary spending. PL E Summary of Financials Total salaries were also down slightly from $1,033,309 to $1,010,281, representing 49.4% of AGI vs. 50.9% in 2010. It’s important to keep salaries under control since they are typically the agency’s largest expense. The average salary to AGI ratio is in line with Second Wind’s recommendation of no more than 50%. After payroll, the biggest agency expense (4.8% of AGI) is building rent/mortgage, with an average of $97,783 spent annually. Payroll taxes and employee insurance also account for a large portion of expenses, with agencies dedicating $86,516 and $75,862 respectively. Employee insurance costs remained flat at 3.7% of AGI, which is the same as last year’s survey. This is good news for agencies, since they often struggle to find affordable and comprehensive health insurance for their employees. Most other agency expenses were similar to last year’s numbers, with marginal increases or decreases in all areas. Two areas where cuts were above average include professional services, which fell from $30,504 to $24,854, and agency self-promotion, which decreased from $23,406 to $17,624. While self-promotion is usually one of the first SUMMARY OF FINANCIALS 5 Payroll & Employee Benefits Data 1. Number of owners/partners at your agency: 7. 2. Number of people employed by your agency: 3. In 2011, your staff: 44% Increased 34% No change 22% Decreased 4. Do you plan to increase/decrease your staff in 2012? 58% Increase 6. 79% 5% 2% 14% Service new accounts Add new departments Merger Other The New Business Developer is paid: 45% Salary plus commission 35% Straight salary 21% Straight plus bonus You employ a full time Traffic Manager Job functions/areas in which you outsource: 70% 64% 57% 34% 23% 22% 21% 20% 20% 19% 11% PL E Account Service Creative Interactive/Digital New Business Public Relations Media Planning Financial/Admin. Traffic/Production Other 28% yes A full time Production Manager A full time Project Manager 18 63% 55% 41% 17% 9% 5% 0% 3% 13% 5% Employ a full-time New Business Developer: Your New Business Developer’s total compensation in 2011 was: 22% 36% No change SA M 5. Percentage of staff that fits this description: 16 Employees 6% Decrease Your primary reason for increasing staff: 93% yes 2 Owners/partners 8. In which departments do you plan to increase? Your agency uses outsourced/freelance/ part-time employees: 9. You outsource: 10. You find outsourced people: 2012 ANNUAL AGENCY SURVEY 29% Regularly 71% As needed/by project 0% Per client request 94% By word of mouth/ recommendation 14% Through local temp/ staffing firms 9% Through national staffing firms 11. You have employees who telecommute: 37% yes 12. You provide job descriptions for all positions in your agency: 82% yes 13. Regularly review employee performance: 86% yes How often? $79,510 30% yes 50% yes 30% yes Web Programming Creative/Design Copywriting Digital Design Proofreading Public Relations Production Media Planning/Buying Bookkeeping Research Other 14. Have an employee policies and procedures manual: PAYROLL & EMPLOYEE BENEFITS DATA 75% Annually 16% Semi-annually 9% Other 85% yes 19 Planning/New Business Data 1. Develop a yearly agency business plan: 62% yes 2. Have a new business plan: 61% yes 3. Methods used to identify new business prospects: 96% Referrals 89% More business from current client 8. Do you respond to RFP’s? 84% yes 9. Use contact management software: 43% yes •ACT •Constant Contact •Daylite •Filemaker Pro •Function Point • • • • Outlook Now Contact Salesforce.com Workamajig 10. Present the agency’s portfolio via: 54% PPT/Keynote 47% Traditional 17% DVD 71% KOEP 26% Direct mail 15% Traditional advertising The primary way you acquire new business is: 50% Referrals 22% More business from current clients SA M 4. PL E (keeping our eyes peeled) 68% Agency website 41% Cold calls 31% Persistent, 365-days-a-year 11. Do you include results-based case studies? 12. Considering only client accounts held for at least one year, for how many years have you serviced your longest-held account? 13. Your AGI increased from 2010 to 2011: You most attribute this increase to: 12% Persistent, 365-days-a-year (keeping our eyes peeled) 16 How many were speculative? 5 6. Number of pitches that gained new projects/accounts for the agency: 6 7. Do you set an annual budget for new business pitches: 18 years 63% yes 67% Increased business from existing clients 9% Expanded agency services menu 2% Agency website 2% Cold calls 1% Traditional advertising Approximate number of new business pitches conducted in 2011: 83% yes 11% Intensive new business program 5% KOEP 5. 69% Online 13% Other 14. The greatest challenge facing your agency is: •Cost of benefits •Economy • Poor cash flow • Pursuing new business •Finding AOR clients •Finding experienced personnel • Slippage • Understanding and selling digital 10% yes If yes, approximately how much is the budget? $24,571 34 2012 ANNUAL AGENCY SURVEY PLANNING/NEW BUSINESS DATA 35 Agency Principal Data You have been at your present agency an average of: 18 2. You have been in the advertising agency business an average of: 22 years 3. Your average age is: 51 years 4. Your primary daily responsibility in the agency other than general management is: 28% Account Service 27% New Business 19% Financial 10% Strategy 6% Creative 1% Interactive/Digital 1% Copywriting 1% Media 6% Other 81% 13% 5% 1% 6. Your highest completed level of education is: 71% College 20% Graduate School 9% High School •English 7. 46 You are: 9. You are happy in the agency business: 96% yes This year Last year Two or more years ago Never 10. How you came to be in the advertising/marketing business: 51% 26% 12% 8% 3% Selected as career Purely by chance Formerly on client side Family business Other 11. At the agency’s present location, you: 53% 36% Rent the space Own the space 12. Trade publications you read most often are: SA M You last took a vacation: •Accounting •Advertising •Communications 46% Spouse 41% Children 22% Other relative years 5. If you hold a college degree, in what field/ major did you receive your degree(s)? Members of your immediate family working with you in the agency: PL E 1. 8. • Graphic Design • Journalism • Marketing • Psychology 83% Married 10% Divorced/Widowed 7% Single 2012 ANNUAL AGENCY SURVEY 7% Own a building and serve as landlord to other businesses 4% Work in your home 57% 48% 26% 25% 6% 21% 13% 10% 1% 9% 9% 5% 18% 32% AdAge Adweek Businessweek Communication Arts Entrepreneur FastCompany Forbes Fortune Graphic Design USA HOW INC Print Wired Other 13. Which industry websites or blogs do you visit/read most often? •AdAge •Adweek •B2Bonline •Fast Company AGENCY PRINCIPAL DATA • Hubspot • Mashable • PR Daily • Seth Godin 47 E PL The Second Wind Annual Agency Survey polls more than 700 member agencies,design studios and public relations firms to gather M comparative data for our members’ exclusive use. Total respondents were 115; approximately 15% of the total SA membership. Not all respondents supplied answers for all questions. No figures herein supplied are intended to be taken as implied standards or recommended as benchmarks, but are supplied simply for review and comparison. Please call Second Wind at 610-374-9093 with any questions. 60 2012 ANNUAL AGENCY SURVEY