Cash flow case study: The Goat Agency

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Poorly managed cash flow and the resulting hole in a business’ finances has the potential to be its downfall, particularly for those starting out in unchartered territory.

16 months into its journey is influencer marketing agency Goat. The agency has transitioned from working with small businesses with short payment terms to brands and agencies like Apple and BBH – this rapid rise from zero to a turnover of more than £1m has presented a real challenge to those running the firm.

This article is adapted from an original piece on AccountingWEB’s sister site BusinessZone by Goat managing director Nick Cooke.

Influencer marketing

As a social media influencer marketing agency, Goat’s relationship with its ‘suppliers’ is unusual.

Social media influencers are individuals running accounts on platforms such as YouTube, Instagram or Facebook with large numbers of subscribers. These influencers provide the ‘reach’ and ‘authenticity’ craved by brands looking for access to the marketing-savvy internet generation.

Top influencers can establish lucrative careers – fashion and beauty video blogger Zoella is reported to be earning at least £50,000 per month through her 10m YouTube subscribers, endorsement deals and other ventures.

Speaking to AccountingWEB, Nick Cooke explained Goat’s business model: “A brand or [advertising] agency will pay us a fee, and we deliver on average 100 to 300 posts per campaign across Facebook, Twitter, Instagram, Snapchat or YouTube to hit their KPIs at better value than other channels in the most authentic way possible”.

Many of Goat’s suppliers are young, based in far flung territories and, according to Cooke, many don’t know how to put an invoice together.

Goat do not buy or manage any of the social media accounts tasked with promoting their products – something done by many of their competitors, and as a result these suppliers require payment for each individual post. Some will be for as little as £10, some £40,000, but on average the company makes more than 1,500 payments per month, a challenge in itself.

Cooke feels that the influencer space presents a unique opportunity. “It's similar to when marketers moved from radio to TV: A whole new channel presented itself, and those companies who could help brands advertise through it effectively were hugely successful.

“We feel like we're in a unique space. Brands are starting to see influencers deliver better value than traditional social ads, our retention rate with clients is 80%-plus and we know this year will be massive for us. Therefore we need to take advantage of the opportunity as much as possible, so we're going to reinvest more back into the business to scale as quickly as possible.”

Key cash flow lessons

Nick Cooke has taken a number of cash flow learnings from Goat’s last 16 months, and his previous business ventures, which he believes hold true for any organisation.

The first is to hold firm when negotiating terms, within reason. “Most businesses and influencers will amend their terms slightly if you hold your ground”, he said. “Don’t feel like you’re doing them a favour because they’re a well-known brand. You’re providing a valuable service. The ideal situation is not to pay suppliers until the corresponding payment is made by a client, however, this is not always possible.”

The second is to be constantly aware of exactly how much cash and credit is in the business. For Cooke, knowing the balance between cash and accounts receivable, and reporting on this balance as regularly as possible is essential.

“Don’t report on it quarterly, do it weekly”, said Cooke, “but always be aware of where you expect to be at the end of the month through projections. Breaking it down on a project-by-project, or a campaign-by-campaign basis helps you to understand where you stand too.”

“It’s essential to use software to generate these reports”, Cooke continued. “You should be able to check your cash flow situation at the click of a button. Thankfully I’m no longer the one making 1,500 influencer payments each month and generating weekly cash flow reports.

Goat uses a combination of QuickBooks and its own custom-built CRM system that is designed to maximise the amount of data available to the business.

As genuine profit over growth becomes the focus for Goat in 2017, the business is likely to succeed or fail based on its ability to balance the books.

“The bigger a business, the greater the cash flow challenge”, said Cooke, “and we’re now fully prepared to deal with whatever the next few years bring.”

About Tom Herbert

Tom is acting editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

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By Thami
24th Jan 2017 08:39

Indeed Sir

Cash flow is a big factor and most companies do not have proper cash flow tools.I always advice on a daily cash flow spreadsheet to be sent to management ,as this will equip management in taking informed decisions prior to cash utilisation.With us we created a daily cash flow spreadsheets and it also assist in daily cash book reconciliations;daily allocations on accounts payable ,daily revenue reports and surely eliminates month end frustrations.

Thanks (1)