What a healthy digital agency looks like

5/5/5

At least five years in business, five employees, and a minimum of $500,000 in annual revenue.

When a company hits these benchmarks, we know they’re ready to step up and start taking their project management operations seriously. They’ve climbed mount start-up and are becoming a sustainable business.

Have at least 1:1 current ratio

If the total money flowing into the company is equal to or greater than the total amount flowing out, you’re doing okay.

This means dividing your current assets by your current liabilities. In other words, take all the money you own or is owed to you (cash, marketable securities, inventory, accounts receivable) divided by all the money you owe to others (short-term debt, accounts payable).

Client services? Even client distribution

Your revenue should be balanced: no more than 35% from any one client, and no less than 5% from any other.

Sinking your trust into one or two major clients puts your company revenue in jeopardy if they walk away. Build revenue targets that create an even distribution and don’t work with jerks. Good clients make happy teams and healthy revenue. Most digital agencies should aim for 10–15 active clients per year with a relatively even revenue distribution (not including maintenance contracts). This range may be higher for firms that are more productized or tactical like SEO or social media specializations.

Have 3–6 months in available cash

You’ve got a few months of cash on hand to cover surprise expenses or revenue dips.

If you can, aim for 30% of your last year’s gross revenue in accessible cash. This means you won’t have to take on unnecessary work or overbook staff to fill your cash flow gaps, and you can hire and train employees without worry. Plus, you’ve got more funds available for contractors if things get busy. Read Jody Grunden’s excellent Digital Dollars and Cents for more details. If you’re not at those numbers yet, we can help with better sales-to-PM alignment.

Be aligned, transparent, and collaborative

Happy teams make happy projects make happy businesses. In that order.

Silos break teams and create fearful closed-off workspaces. Promote collaboration, and support failure through regular workshopping, process exploration, and candid conversations. In fact, put time aside every week for this and protect it with your life. Teams who commit to self-improvement streamline workflows and invest in and promote leaders internally to reduce hiring costs. They are more profitable. Work towards an even split of juniors, mid-levels, and senior staff and model mentorship and support.

A project lead for every 5–10 staff

You’ll start to feel the cracks at five or six folks. By 7–10, you want to promote a lead from within or hire a new one.

You want to balance the number of project managers so you’re creating an autonomous team that can react and respond to change. Good project management should be invisible. Start the hiring process before the big cracks form so you can onboard just in time.

Project leads support project intake

Whether project leads support business development or help prioritize new projects, they are your secret weapons and need to be included in the planning and intake process.

Bring your leads in after that first sales or brainstorming call and let them walk through potential risks and benefits, probable red flags, and a high-level budget and schedule range. This empowers them to keep the schedule, scope, and budget in check—and keeps stakeholders aligned and happy.

Measure outcomes, not labour

Revenue shouldn’t be dependent on time alone. Productive staff complete outcomes, they don’t squeeze out higher utilization.

When they do bill in time units, healthy companies bill in larger chunks like days or sprints—not hours. Hours slip through the hourglass undetected, punish faster workers, and don’t match revenue cycles. Companies who charge in larger chunks of time or do value-based billing have more room for salaries and time off, more space for innovation, and are more profitable.

Teams run max 3 projects at any time

Focused projects move through the company faster, which keeps revenue and teams flowing happily.

Sure you can force your team to manage five or ten projects at once, but they lose 40% of their focus to task switching. Instead, narrow each week’s focus to no more than two or three projects, assign a dedicated team and focus on work that prioritizes even cash flow and high-quality outcomes. The neat side effect? A team that has time for continuous improvement and fewer ‘fill-the-gap’ throwaway projects that derail them. This is a target worth reaching for. Dedicated teams are successful ones.

People doing the work estimate and scope the work

You can’t scope what you don’t know. The people doing the work should define it.

Each person on the team is a specialist at what they do, so let them contribute to the bigger picture of how the work gets done and let the team practice (most are terrible at estimating and scoping to start). In time, you’ll find they automate the process to build patterns and structures that you can scope quickly and easily. This builds your team’s confidence and reinforces better scheduling, resourcing, and prioritization.

Staff take vacations and don’t work overtime

Healthy teams plan healthy project schedules and take time away from work.

Make room for fun things like onsite learning and team retreats. Make time off and playtime a regular part of a balanced company breakfast. Your folks work hard and without them, your company doesn’t exist. Honour their time away and find ways to be more profitable doing less work as the automated workforce changes how work gets done.

Pay employees enough or more than regional industry standards

Pay employees what they’re worth so they don’t need to worry about money.

Pay people what they’re worth and if you can’t, change your business model so you can. Focus on paying your people well before adding more faces. Professional development is cheaper than hiring and prioritizes great project leads. Know your market and geography, and aim for the 80% percentile salary as your average. Top paid owners and executive staff shouldn’t make more than 30% of the next highest-paid staff. If they do, it’s time to give folks a raise. A rising tide lifts all boats. Be that tide.

Grow sustainably

Smart companies grow sustainably. They don’t grow for the sake of growth.

Growing your team too quickly means fragmented processes and incoherent management structures—not to mention cash flow strain. Remember that every person you add to your team means (at minimum) multiplying that person’s salary by 2× to support expenses, taxes, and profit. Instead of growing quickly, grow intentionally. Make a target for your team size and know that smaller teams can stay lean and agile in a world that favours collaboration, lean processes, and autonomy.

Respect the role of project management

Your company can elevate the role of project management, or it can sink it.

When you make space and time for the people running your projects to introduce new processes and ideas, you create safety to explore ways for them to return value to the company. When you give them a voice at the table to set and reset boundaries with stakeholders and timelines, you empower them to take up space so you can let go of it. When you listen proactively if they tell you there is no capacity or not enough budget available to start new projects, you prevent burnout and scope creep that causes resourcing and cashflow dips. When you support your project leads by giving them autonomy to galvanize the team, you shift your entire culture. Project management is the leverage point in the system. This is your collective power as a company. Do not abuse it. And if you do not understand the process or its power, you are collectively humble to learning it.

Hire for goals, not fit

Companies who value an inclusive culture don’t talk about it. They do it.

Make it a priority to have a diverse team with disparate opinions and different backgrounds. Don’t hire for merit or fit, or you will hire more people who look, think, and act like you. Instead, hire folks who want to grow with your company and have similar professional or life goals. They challenge you, improve your products, force you to embrace new ways to solve problems and enrich and strengthen team culture. Embrace different.

Democracy at work

We’d put everything on the line to keep democracy in our governments. Why do the institutions we spend most of our time in resemble dictatorships?

The factor that makes the biggest impact on our people is the distribution of decision-making power. When people are informed, treated with dignity, and given a say in their fate, they stay longer, make decisions that benefit the team, and cultivate a culture of support and safety. Fight the urge to “protect the team” by obscuring the truth or taking control when times are tough. They’ll intuitively sense danger, and that’s when you lose trust—and potentially lose them.