The Problem With Benchmarking and What to Do Instead

Points of Interest00:00 – 00:47 – Intro and Gratitude: Marcel thanks listeners and sets up the episode's focus on benchmarking traps and performance evaluation.00:47 – 01:33 – The Benchmarking Trap: Marcel introduces the risks of relying on external benchmarks instead of understanding your agency’s internal performance model.01:33 – 02:53 – Rate Benchmarking Limitations: Marcel explains why comparing rates fails to provide meaningful insights, especially with modern pricing models.02:53 – 05:00 – Flat Fees and Efficiency: He discusses the rise of value-based and project pricing, and how efficiency affects realized rates.05:00 – 06:08 – Realized Rates vs. Rate Cards: Marcel highlights that listed rates (rate cards) rarely reflect the actual rates agencies earn.06:08 – 07:29 – The Power of Average Billable Rate: Marcel introduces average billable rate as a more meaningful metric, blending efficiency and pricing insights.07:29 – 09:30 – Challenges in Measurement: Marcel explains why few firms measure key metrics like average billable rate and the inconsistencies in benchmarking them.09:30 – 12:26 – Revenue per FTE Caution: He critiques absolute revenue-per-FTE benchmarks, emphasizing cost structure and geography's role in profitability.12:26 – 14:00 – Look Inward First: Marcel urges agencies to focus inward on their business models instead of seeking external validation.14:00 – 17:33 – Understanding Your Agency Model: Marcel explains how to map team structure, capacity, and time allocation to determine delivery and utilization ceilings.17:33 – 19:48 – Budgets and Cost Breakdown: He emphasizes categorizing hard costs into delivery, sales, admin, and facilities to build a clear financial model.19:48 – 22:44 – Revenue Potential Example: Marcel demonstrates how capacity, utilization rate, and average billable rate determine an agency's revenue potential.22:44 – 25:00 – Delivery Margin and Overhead Benchmarks: He shares benchmarks for delivery margin (50–60%) and overhead costs (20–30% of AGI) to evaluate profitability.25:00 – 28:47 – Operating Profit Targets: Marcel outlines healthy operating profit margins (20–30%) and explains how utilization and billable rates interact within a model.28:47 – 31:00 – Beta Tool for Agencies: Marcel announces Parakeeto’s beta software for modeling agency performance, offering free access for listeners to analyze and improve their businesses.Show NotesPricing models / Margin TargetsEpisode on RatesToolkit LinkLink for our beta free access to our model softwareLove the PodcastLeave us a review here. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.