Keep control of digital profits

South coast digital agency Redweb has joined the current discussion on concerns for the state of profit margins in the digital arena.

Its comments come following articles in Revolution: ‘Profits up, but performance varies’ and NMA (08.03.07): ‘Agencies recorded an average profit margin of 9.6%, the lowest for any discipline except for design in 1996 – though has increased by 0.6% on the previous year’.

The articles suggested methods for addressing the issue, such as managing clients’ expectations better, delivering projects and time, and to budget and getting clients on a retainer - but Redweb’s Andrew Henning offers a more pragmatic solution.

He said: “Projects rarely end up being as simple as the original brief indicates. The only way to ensure you keep a tight rein on the flow - for anything involving more than one resource or milestone - is to combine account management with project management.

“The key to success is hiring skilled people who are truly committed to client care, which make is it easier to discuss budget issues when there is project scope creep. The client also sees that real value is being added, which can be measured demonstrably in some of the solutions that result - very useful if they have to justify increased budget to the board.”

Using these strategies, Henning reports Redweb is enjoying healthy profit margins and says its ‘profit per headcount’ growth is higher than the majority of digital agencies.

“We have a policy of investing in areas of proven value and account management is one of them,” explains Henning. “Since the beginning of the year we have increased our headcount in this area by 20% and definitely see the corresponding return on investment.”

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