How To Achieve Agency Profitability, Part 2
I hope you’re thinking about the questions raised in Got Profitability?, and that you’re changing some of your answers as a result.
Now let’s ask a few more questions. The “right” answers will get and keep you on the road to agency profitability:
1) Do you track how much projects/initiatives actually took in time vs. what was originally budgeted? Do you keep this in a database, so that when you budget similar projects in the future, you know not only what the previous project’s planned budget was, but more important, what it actually required in man hours, and at what staff title/level?
2) Do employees track their time using time sheets? What’s the compliance rate? There’s a reason we have time sheets: because they work. But this is true only if your staff completes them, accurately, and on a regular basis. It’s critical that you communicate that you need the staff to complete time sheets accurately, not based on the allocations their managers gave them, but on how they actually spent their time. Assure them that although there may be discussions, there won’t be any repercussions if they exceed their monthly allocation on an account. After all, if a staffer over-spends an allocation, it might not mean that they’re an “hours hog.” It might simply mean that the person who crafted the budget didn’t get it exactly right, or that the staffer was able to complete more work than originally planned. Reinforce to the team that the time sheet is neither a report card nor a client invoice, but simply a tool to help the agency do a better job of fiscal management. And that benefits everyone.
3) To that end, do you break your monthly budgets into hours for each team member? Every month, do you track how much was actually spent in man hours/$ vs. what was projected? Do you observe who regularly exceeds their allocation? Assuming you do so, do you determine if this is because that staffer isn’t efficient, or simply because you didn’t originally allocate a reasonable amount of hours to get the job done?
4) What’s your response when an account team substantially exceeds its monthly allocation? Do you re-adjust the hours given to each staffer to balance this out the next month or the months thereafter? Or do you simply write-off the time and hope for the best the next month? (Guess which is the right thing to do!)
5) Do you have a written Scope-of-Work for every client? Does it clearly identify what you’ll do for the client? Equally important, does it note what activities aren’t covered in the current engagement/budget? Does your contract state that you’ll monitor hours spent on the client’s behalf, and if you go substantially over after three months, what action you can take to remedy this? Does it identify what’s “substantial”?
6) Do you meet with clients on whose business you regularly go over budget, to get their input and agreement to modify the situation? Do you discuss a) Gaps between fee budgets and time spent (on a regular basis); b) Fiscal impact on the agency; c) Parts of the program which might be jettisoned to reduce the overage; and/or d) Parts of the program currently handled by a senior team member which could be effectively handled by a lower level staffer?
I hope these posts have gotten you thinking–and taking action!– to get more profitable. Look for more in Part Three. In the meantime, please leave me a comment regarding other steps you take to “Get Profitability, ” and kindly share this post if you know of agency owners/leaders who’d benefit from reading it. Finally, I hope you’ll contact me if your firm needs help to achieve its profitability goals.