Financial self-assessment is critical to increasing agency value.

AGENCY VALUATIONS BY AGENCY EXPERTS. INSIGHTS FOR AGENCY OWNERS. (BY STEVE KOSKELA, PARTNER)

As they strive to build a successful and highly valued business, agency owners are typically (and correctly) very focused on how well they're serving their clients, the effectiveness of their new business programs and the strength of their service offerings.
 
However, we know from experience that owners often don't devote enough time and attention to monitoring key financial metrics and circumstances which may have significant impact on their agency's future value.
 
Beyond regular reviews of the basic financial statements, you need to have a better understanding of your agency's true financial condition. This will also help to establish measurable goals for increasing value by concentrating on a few critical indicators. 
 
As just three examples of what you should look at more closely: 1) The adequacy of working capital in relation to monthly operating cash requirements, 2) "Normalizing” net operating earnings by adjusting for one-time extraordinary items or below-market compensation for the agency's principals and 3) Developing a reliable client revenue forecasting routine. These are three of the "Financial best practices" which should all be key elements of your ongoing strategy to build financial strength and market value.

(A highly experienced CPA, Steve Koskela has been CFO of global and regional marketing communications agencies.)

At AGENCY VALUATIONS (www.adagencyvaluations.com), we help agency principals to better understand and use the key metrics and tools for building agency value by identifying areas of financial vulnerability and leveraging  areas of financial strength. Our three partners have been CEOs of six agencies, CFO of three more and include a CPA. Collectively, we've developed 30 valuations for a wide range of marketing communications agencies across the United States.

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