The 90-Day Agency Cash Flow Makeover

Hey there,

Welcome back to the Agency Finance Letters. This one will be a 5 minute read.

Today I'm sharing the exact system that took one of my agency clients from constant cash stress to 3 months of runway.

And no, they didn't need to 10x their revenue or fire half their team to do it.

The Problem

Last quarter, I worked with an agency doing $250K/month. On paper, they were profitable.

In reality? They were constantly juggling payments and stressing about payroll.

Sound familiar?

Here's the 90-Day Cash Flow Makeover we implemented:

Month 1: Cut Unnecessary Costs

We discovered three major cash leaks:

1. Unused, duplicate, and monthly subscriptions.  

2. People costs were over 75% of revenue. 

3. Paying contractors before getting paid

Quick wins we implemented:

• Reviewed current subscriptions, unsubscribed to any duplicates or unused. For the rest, converted to annual plans, cutting software costs by over 30%. 

• Reviewed the team pay. The entire team was on fixed pay. We incorporated performance based compensation to senior roles to balance out the fixed expenses.

• Cut excessive spend on marketing and coaching. 

Month 2: Restructure Your Revenue

The big move: Focusing on net retention.

How we did it:

1. Started tracking net retention to determine how much revenue was from existing clients.

2. These metrics helped guide the growth marketing team to grow existing clients rather than acquiring new clients constantly.

3. Implemented an invoice tracking system to keep on top of cash collection.

The result? Revenue became more predictable, and the gaps between payments shrank.

Month 3: Build Your Buffer

Now that cash was flowing better, we built systems to keep it that way:

1. Analysed cash flow on a weekly basis, to consistently monitor outflows and inflows.

2. Created a 13-week rolling cash forecast.

3. Established minimum cash balance triggers.

The Results

After 90 days:

• From 2 weeks to 2 months of runway.

• Increased cash collection on invoices.

• More incentivised team, with goals aligned with the agency.

• Massively growing revenue based on existing client base instead of huge inflows of new clients on small retainers.

Hopefully some of these tips can help give some more clarity and build a solid cash buffer. 

Until next week,

Joey

P.S. Remember: Cash flow problems kill profitable businesses every day. Don't wait for a crisis to fix yours.