A $20M creative agency had substantial revenue, a large team, and what appeared to be a healthy cash position. But beneath the surface, the agency was losing money and lacked a clear view of why. Better visibility into profitability, utilization, costs, and revenue timing helped leadership see what was really happening — and change course.
The agency had historically generated around $20 million in annual revenue, but revenue had fallen to less than $17 million.
Leadership knew spending was high. What they did not have was a clear picture of whether the agency was actually profitable.
Part of the problem was how the financial information was being reported.
The agency operated largely on cash-basis reporting. One major client also made substantial advance payments, creating a strong cash position that made the business appear healthier during the year than it actually was.
As those advance payments were worked down, the real financial picture became visible.
By year-end, the agency had lost approximately $1.1 million.
But knowing the final number wasn't enough. Leadership needed to understand why it happened.
The agency lacked visibility into several critical areas:
Gross margin by client and project. People were the agency's largest cost, but fully loaded compensation costs were not being consistently matched against the revenue they generated.
Billable versus non-billable contractor expense. Contractors supported both client work and other activity, making it difficult to see how much contractor spending was actually producing revenue.
Team utilization. The agency had a target of approximately 60% billable time but lacked reliable reporting to show whether it was consistently reaching it.
Revenue timing and forecasting. Cash collected did not necessarily represent revenue being earned during the same period.
The problem wasn't simply that the agency was spending too much.
Leadership did not have the financial visibility needed to see where profitability was being created — or lost.
Bender CFO Services began by rebuilding the financial information leadership was using to make decisions.
The agency's existing financial system had accrual capabilities that were not being fully used.
Moving the reporting toward accrual accounting made it possible to better match revenue with the periods in which client work was actually being delivered.
That immediately provided a more accurate picture of operating performance.
Reporting was developed to match fully loaded people costs against revenue.
Instead of simply knowing total revenue and total payroll, leadership could begin evaluating gross margin before overhead — including at the client and project level.
Contractor spending was broken apart based on whether the expense supported revenue-producing client work or represented overhead and non-billable time.
This helped management see an important profitability lever that had previously been difficult to identify.
Utilization, gross margin, forecast accuracy, and other operating measures became part of a regular CFO reporting rhythm.
Instead of discovering problems at year-end, leadership could see changing conditions while there was still time to respond.
The agency also gained better visibility into when contracted revenue would actually be earned and worked.
That made the forecast more useful for decisions around staffing, spending, capacity, and growth.
The financial turnaround took work, but better visibility began influencing decisions quickly.
Early in the engagement, management could see that a quarter that appeared healthy from a cash perspective was actually weak from a gross-margin perspective.
That distinction changed the conversation.
Previous year:
Approximately $1.1 million loss
First year with Bender CFO Services:
More than $1.1 million in profit
First half of year two:
Profit more than doubled compared with the same period the previous year
Based on its first-half performance, the agency was on pace to substantially outperform the prior year's full-year results
The company also made progress reducing its dependence on one large client while improving the forecasting and financial information available to guide business-development decisions.
Revenue alone doesn't tell you whether an agency is financially healthy.
Neither does the amount of cash sitting in the bank.
For an agency with substantial employee and contractor costs, profitability depends on understanding how people, client work, capacity, utilization, pricing, and overhead work together.
This agency wasn't suffering from a lack of work or capability.
It lacked visibility.
Once leadership could see gross margin, utilization, contractor costs, and revenue timing more accurately, it had better information for making decisions — and the financial performance of the business changed with it.
If your agency is growing but you aren't confident about profitability, capacity, cash flow, or what the next six to twelve months really look like, the first step isn't necessarily another spreadsheet.
It's getting clear on what the numbers are telling you.
Schedule a Financial Clarity Conversation with Shane Bender.
We'll talk through what you're seeing inside the business, where the financial picture may be unclear, and whether better forecasting and financial visibility could help you make your next decisions with greater confidence.