The EngineBI Way Overview

The Budgeting and Forecasting process for Marketing Agencies

I started Rise Interactive after winning $10k and taking 2nd place at the University of Chicago’s annual business plan competition. I used the reward as the seed money to grow Rise from just me to one of the largest independent digital agencies in the world. While leading this brilliant agency over 16 years, we:

  • Grew out of 6 offices

  • Expanded to 3 countries, 

  • Won shelves full of awards, 

  • Earned hundreds of tier-1 clients, 

  • Built a team of nearly three hundred people, 

  • …and then I was ready.  I sold Rise to Quad.

When people ask me what made Rise so successful, I explain: it was our planning, budgeting and forecasting process. Most people are surprised to hear this is the case so in this post I plan on explaining why budgeting & forecasting is so important, as well as the approach we recommend using.


Why is Budgeting & Forecasting Important

Every agency owner has a strategic plan whether they know it or not. Each agency owner determines what is important to them based on what they choose to spend their time and money on. For example, I have been told by many agency owners that they want to grow faster but it turns out they are not spending any money on sales & marketing. This tells me that they are not truly serious about growing faster.

The fact is that if a goal is important to you then you must put a budget behind it. Any work/time spent towards reaching that goal is done by someone your agency is paying, and that time spent equals an investment in your goal. That means that understanding where you have invested your expenses will reveal what that strategic plan really is.


Everyday decisions shape how we spend our time and money, so building an effective budgeting and forecasting process is vital to ensuring that resources are allocated to support your plan. By deliberately planning your goals and expenses, you’ll be able to make the right investments for your future success. 


Achieving accurate budgeting and forecasting requires an efficient approach. With a tried-and-tested methodology, you can maximize your return while minimizing the time spent in the process. In no time at all, you will be able to make smarter decisions with both your money and your precious hours. This is why we created The EngineBI Way, which is our proprietary methodology to budgeting and forecasting.

Why the “EngineBI Way” is the better way for budgeting & forecasting?
Budgeting can seem like a daunting task, but it doesn’t have to be. In fact, with the right approach, budgeting can become an asset rather than a source of stress. We personally believe that The EngineBI Way is the best approach to budgeting. Three reasons why this method will change your life (okay, maybe just your financials) are: 


The first aspect of the EngineBI Way that sets it apart is it will force the leadership team to be accountable to the results. We do this by having a methodology for locking your budget, as well as each re-forecast that you create.  Once these budgets are locked in place, they become set in stone, and you cannot make any changes to them. With this strategy, when you finalize your books, you can compare your actuals to the original plan and each forecast. This makes it impossible for anyone to cover up their performance relative to what was set out in the beginning.


Informed Decision Making

The second advantage of this method is its ability to help inform decision-making. We have a standard set of chart of accounts, as well as a granular data structure which allows owners to easily manipulate their data and answer crucial questions related to running their agency. This helps owners make more informed decisions about their finances so that they can be better prepared for whatever comes their way. Additionally, by having the power of making informed decisions, agency owners are able to adapt quickly to unique situations.


Deliberate Planning

Lastly, this method allows owners to plan deliberately and ensure they’re always investing in their firm in the right ways. With this approach, owners will have insight into how much money should be allocated towards each investment so that their agency is better off next year than it is today. This deliberate planning will help ensure success now and down the road.


We believe that The EngineBI Way offers an excellent approach to budgeting for agency owners who want an efficient, accountable system in place when dealing with their financials. It provides accountability through locked budgets, informed decision-making by providing a standard chart of accounts and granular data structures, which allows for deliberate planning so that owners know exactly where each dollar should go for maximum impact on their business’s success.


The EngineBI Impact: 4 Reasons to Follow the EngineBI

By following this approach, you should be able to see a substantial impact on your business in four key areas: year over year revenue growth, gross margin improvement, increased EBITDA, and more cash flow. We call this “The EngineBI Impact.” Let’s dive into each of these areas and discuss why it’s so important for agency owners to follow this approach.


Revenue Growth

The goal of the EngineBI Way is to increase the amount that you spend on sales and marketing while ensuring that it is more effective. We also help you make investments in your service so that your customer retention rate goes up. Both of these should lead to greater revenue growth.


Gross Margin Improvement 

To stay profitable, it’s essential to understand your gross margin. This is calculated by subtracting cost of service (all expenses and payroll dedicated to client work) from net revenue (revenue without pass-through revenue like media).


EBITDA Improvement

A major focus of the EngineBI Way is making sure that all expenses are within benchmarks set by SG&A (expenses). This will ensure that when it comes time to calculate EBITDA (earnings before interest, taxes, depreciation and amortization), everything adds up properly and efficiently.


Cash Flow Increase

Last but certainly not least, we prioritize growing your cash. Having extra cash on hand for rainy days or opportunity investments could make all the difference for an agency looking to stay afloat in tough times or expand operations during good times.

When it comes down to it, succeeding as an agency owner is about making smart decisions with what money you do have in order to maximize efficiency and profitability.  Following the EngineBI Way can ensure that you are doing just that. With its emphasis on increasing revenue growth, optimizing gross margins, improving EBITDA calculations, and growing cash flow reserves, there’s no doubt that this approach can take any agency from good-to-great.


Securing and Re-evaluating Your Finances for the Entire Year

Every business needs a budget. It allows you to set your revenue and profit goals, as well as make strategic investments for the year. But one mistake people often make is creating a budget but never locking it. Instead, agency owners continually update the budget as inputs change. As mentioned above, The EngineBI Way requires you to stay true to your original plan by locking it. By keeping a strict budget, it encourages you not only to become responsible but also forces accountability.


The Benefits of Locking Your Budget

Locking your budget means that you are no longer able to make any changes during the fiscal year. This way when each month closes, you can compare your actual performance to how you did compared to the budget. 


Creating Forecasts Throughout The Year

In addition to creating an official budget for the fiscal year, it’s also important to create multiple re-forecasts throughout the year. Re-forecasting allows you to update changes throughout the year such as hiring new employees or investing in new technology.   Re-forecasting is one of your most reliable expense management tools. With the current month’s actuals and insights into new business activities, you can decide whether to cut costs or invest more funds. On top of that, it allows you to become a budgeting master since recurring patterns provide greater accuracy in its development.


Locking Your Forecasts

To ensure accuracy, it is advisable to frequently lock your forecasts. We highly suggest this be done at least every quarter. This way you can compare and contrast your initial plan as well as with each forecast that was made throughout the year.


Ultimately, it is essential for all businesses to have a locked budget in place; this allows them to track your progress during each month of the fiscal year and keeps everyone accountable. Furthermore, you should also create re-forecasts so that you are able to update any changes made throughout. Taking these steps will ensure that company goals remain on target and valuable investments can be made with regards to strategic objectives.


In order to truly analyze your actuals to the budget or forecast you need to ensure that your team is all using the same language. A key part of The EngineBI Way is how we define each element of the Income Statement.  It is structured for an agency so that you can maximize the insights gained to help you grow.  

Unlocking the Secrets of the Income Statement: A Comprehensive Guide to Comprehending Its 11 Core Elements

As an agency owner, you know that understanding your finances is essential for success. But what about the income statement? Many agency owners have been in business for years and still don’t understand how to use it correctly. After analyzing hundreds of agencies’ financials, we found that many of them don’t know there are 11 major sections of the income statement and more importantly what you put in each component. So let’s dive into those sections and learn how to organize them so you can get the most out of your financial analysis!



Agencies typically have two components making up their total revenue. The first of such is referred to as gross revenue, which includes your fees and pass-through income combined. Let’s say you charge $3 million in fees and earn another $17 million from media–your gross revenue would then amount to a grand sum of $20 million.


The second part of your equation is net revenue, which only consists of the fees you collected. Taking the example above, $3 million in fees that you took from customers would be computed as your net revenue. The other $17 million designated for pass-through media will not count here since it goes to vendors and you do not receive any money out of it.


We suggest that you only include your net revenue in the “revenue line” of your income statement and move all pass-through revenue to “other income.” This way, when you analyze the revenue portion of the income statement, there’s no need to do any math in your head. With certainty, you can track the exact amount of revenue that your business is generating.


Cost of Service

All costs associated with providing your clients with services should be included here, such as labor charges, subcontractors’ fees, materials expenses, licensed software and any other direct expenditures related to the agency’s client work.


Gross Margin

To determine your gross margin, subtract the cost of service from net revenue. It’s a reflection of how profitable you are in servicing customers and determines how much money is leftover after covering direct costs associated with providing services. We highly recommend that agencies consider this number both absolutely and as a percentage of their net revenue. 


SG&A (Selling, General & Administrative)

No matter the size of your agency, we have found that all expenses that do not relate to client work will fit in one of four categories. These groups are Sales & Marketing, Operations & Finance, Research & Development and Executive.  


EBITDA (Earnings Before Interest Taxes Depreciation & Amortization)

This section reveals your profit before taking into account expenses such as interest payments, taxes, depreciation and amortization. You will want to view this number in both its absolute terms, as well as a percent of net revenue. Additionally, it’s worth noting that the value of your agency is based on a multiple related to EBITDA, so this figure has tremendous significance. 


Other Income/Expenses

This area encompasses additional revenue and costs that are rarely significant contributors to your business. For example, if you get a small commission from a partner, it should be listed under the “Other Income” category instead of in the “Revenue” section. Similar to “Other Income”, all non-day-to-day operational costs should be categorized as “Other Expenses.” Furthermore, depreciation and amortization should be included in “Other Expenses.” Finally, both pass through revenue and cost must go in their respective categories: “Other Income” & “Other Expenses.”


Operating Income/Loss

Operating Income or EBIT (more commonly known as Earnings before taxes and interest), allows you to fully comprehend your gains and losses without considering taxes or interests. It provides a detailed glimpse of the actual profits accrued from running your business.


Taxes & Interest

It is important to factor any taxes or loan interest your company owes into this section. Even if you are an S-Corp or LLC, we suggest projecting the tax burden of running your business in order to plan for how much money needs to be set aside and understand precisely what profit comes from running the agency.


Net Income

Ultimately, your agency’s performance can be evaluated by its net income. This will help you understand whether your cash flow is increasing due to operations.


As an agency owner, it’s imperative to understand your income statement. By appropriately categorizing every transaction into the proper bucket, you can make sound decisions that will not only protect but also bolster your business.  


Informed Decision Making Through Data Organization

As an agency owner, you know how important it is to make informed decisions. However, making wise decisions requires two key components: knowing the right questions to ask; and having your data organized in a granular fashion for easy manipulation. Fortunately, The EngineBI Way is here to help with both of these things.

Asking the Right Questions

The EngineBI Way steers you to ask the most pertinent questions. We will help you determine the questions that will help you generate more revenue, increase your gross margin as a percentage of net revenue, identify cost-controls for maximum profits and evaluate how well your business is doing cash wise.


How Do I Organize My Data?

In order to be able to answer the crucial questions, it is essential that you can make sense of your data. The EngineBI Way takes budgeting and forecasting to the next level by providing an incredibly detailed breakdown. The key is adding attributes to revenue, cost of service and SG&A so that you can make informed decisions based on manipulating data. With this approach, you will have far more insight into your business than ever before.


In summary, if you want to scale your agency and bring it to the next level it is crucial to have a systematic budgeting and forecasting process that will make you more accountable, improve your decision making and ensure that you are more deliberate in your planning. 


Following the “EngineBI Way” will ultimately lead you to increased revenue, profits and cash.


Happy Planning!