Overhead refers to the ongoing expenses or costs that an ad agency, PR agency, or advertising agency incurs in order to support its overall operations and functions. These expenses are not directly tied to the production or delivery of specific products or services, but they are essential for the agency to function effectively.
Examples of overhead expenses in an agency include rent for office space, utilities such as electricity and internet, salaries of non-client-facing staff members, marketing costs to promote the agency's services, and administrative expenses like office supplies and software subscriptions. These expenses are necessary to maintain a productive work environment, attract and retain talented employees, and ensure smooth day-to-day operations.
Understanding overhead is crucial for juniors in advertising as it helps them grasp the financial aspects of running an agency. By comprehending the various overhead expenses, they can better appreciate the need for budgeting and cost management in order to maintain profitability. Additionally, recognizing the distinction between overhead and direct costs allows them to accurately allocate resources and determine the true cost of delivering client services.
By being aware of overhead and its significance in the agency's financial health, juniors in advertising can contribute to informed decision-making and strategic planning. They can actively participate in discussions about resource allocation, pricing strategies, and overall financial performance, ultimately enhancing their understanding of the agency's business model and its impact on client relationships and profitability.
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